We study the relationship between outside options and workers’ motivation to exert effort. We evaluate changes in outside options arising from age and experience cutoffs in the Austrian unemployment insurance (UI) system, and use absenteeism as a proxy for worker effort. Results indicate...

Consider a repeated principal-agent setting with verifiable effort and an extra profit that can materialize only if the agent is talented. The agent is overconfident and updates beliefs using Bayes’ rule. The agent's principal-expected compensation decreases over time until high talent is...

We analyze a repeated principal-agent setting in which the principal cares about the agent's verifiable effort as well as an extra profit that can be generated only if the agent is talented. The agent is overconfident about his talent and updates beliefs using Bayes' rule. An exploitation...

We study the relationship between outside options and workers' motivation to exert effort. We evaluate changes in outside options arising from age and experience cutoffs in the Austrian unemployment insurance (UI) system, and use absenteeism as a proxy for worker effort. Results indicate that a...

We study the relationship between outside options and workers' motivation to exert effort. We evaluate changes in outside options arising from age and experience cutoffs in the Austrian unemployment insurance (UI) system, and use absenteeism as a proxy for worker effort. Results indicate that a...

This paper theoretically investigates how labor-market tightness affects market outcomes if firms use informal and self-enforcing agreements to motivate workers. We characterize profit-maximizing equilibria and derive the following results. First, an increase in the supply of homogenous workers...

We study optimal employment contracts for present-biased employees if firms cannot commit to long-term contracts. Assuming that an employee's effort increases his chances to obtain a future benefit, we show that individuals who are naive about their present bias will actually be better off than...

This paper theoretically investigates how labor-market tightness affects market outcomes if firms use informal and self-enforcing agreements to motivate workers. We characterize profit-maximizing equilibria and derive the following results. First, an increase in the supply of homogenous workers...

We analyze a repeated principal-agent setting in which the principal cares about the agent’s verifiable effort as well as an extra profit that can be generated only if the agent is talented. The agent is overconfident about his talent and updates beliefs using Bayes’ rule. An exploitation...