We use a static framework characterized by both moral hazard and holdup problems. In the model the optimal allocation of bargaining power balances these frictions. We examine the impact of improved monitoring on that optimal allocation and its impact upon effort, investment, profits and rents....

In this study, we examine two adjudication methods designed to resolve disputes between principals and agents concerning bonus payments in relationships characterized by moral hazard and where the parties have been forced to use soft, imprecise, and subjective information to align incentives....

In this study, we examine two adjudication methods designed to resolve disputes between principals and agents concerning bonus payments in relationships characterized by moral hazard and where the parties have been forced to use soft, imprecise, and subjective information to align incentives....

We use a static framework characterized by both moral hazard and holdup problems. In the model the optimal allocation of bargaining power balances these frictions. We examine the impact of improved monitoring on that optimal allocation and its impact upon effort, investment, profits and rents....

We analyze a multitasking model with a verifiable routine task and a skill-dependent activity characterized by moral hazard. Contracts negotiated by firm/employee pairs follow from Nash bargaining. High- and low-skilled employees specialize, intermediate productivity employees perform both...

Several European countries have reformed their labor market institutions. Incentive effects of unemployment benefits have been an important aspect of these reforms. We analyse this issue in a principal-agent model, higher level of unemployment benefits improves the workers' position in wage...

Several European countries have reformed their labor market institutions. Incentive effects of unemployment benefits have been an important aspect of these reforms. We analyze this issue in a principal-agent model, focusing on unemployment levels and labor productivity. In our model, a higher...

We analyze a two-task work environment with risk-neutral but inequality averse individuals. For the agent employed in task 2 effort is verifiable, while in task 1 it is not. Accordingly, agent 1 receives an incentive contract which, due to his wealth constraint, leads to a rent that the other...

We study the problem of deterring undesirable behavior in a moral hazard framework with risk averse individuals, noisy information and costly sanctions. We find that, if sanctions are a pure loss, a utilitarian society should use a bang-bang penalty scheme satisfying the maximum penalty...

We consider the effects on reward systems of workers' concern with relative pay by comparing the wage costs of providing incentives through group versus individual bonus schemes. When workers have a propensity for envy, either scheme may be the least cost one depending on the workers' outside...