This paper analyzes a labor market, where firms offer workers incentive contracts and make decisions about irreversible capital investments. The state authority regulates the institutional framework by choosing the level of unemployment benefits and the workers' bargaining power. Our results...

We develop a theory of a firm in an incomplete contracts environment which decides on its complexity, organization, and global scale. Specifically, the firm decides i) how thinly it wants to slice its production process by choosing the mass of symmetric intermediate inputs that are...

This paper offers a rationale for limiting the delegation of (real) authority, which neither relies on insurance arguments nor depends on ownership structure. We analyse a repeated hidden action model in which the actions of a risk neutral agent determine his future outside option. Consequently,...

Teamwork and cooperation between workers can be of substantial value to a firm, yet the level of worker cooperation often varies between individual firms. We show that these differences can be the result of labor market competition if workers have heterogeneous preferences and preferences are...

We combine the traditions of Coase and Adam Smith to look for the most efficient mechanisms in situations where buyers need sequences of human asset services, but only know their sequence one step ahead. The environment has two critical features: (a) multilateral matching allows gains from...

How can a manager influence workers' activity while knowing little about it? This paper examines a situation where production requires several tasks, and the manager wants to direct production to achieve a preferred allocation of effort across tasks. However, the effort that is required for each...

Comparison of three related adverse selection models is presented. There is a selfish owner, a selfish employee, and an imperfectly altruistic employee. Model 1 involves hiring choice. The owner hires the altruist because he produces the same for less pay due to his positive externality for the...