In a multi-agent setting, individuals often compare own performance with that of their peers. These comparisons in?uence agents? incentives and lead to a noncooperative game, even if the agents have to complete independent tasks. I show that depending on the interplay of the peer effects,...

We analyze whether incentives from relative performance pay are reduced or enhanced if a department is possibly terminated due to a crisis. Our benchmark model shows that incentives decrease in a severe crisis, but are boosted given a minor crisis since efforts are strategic complements in the...

We consider a dismissal tournament where the loser gets fired. Although the firm takes possible selection failures into account when choosing the optimal tournament design, the selection efficiency of a dismissal tournament is often rather low. This is because low-ability workers, possessing...

We consider a two-stage principal-agent model with limited liability in which a CEO is employed as agent to gather information about suitable merger targets and to manage the merged corporation in case of an acquisition. Our results show that the CEO systematically recommends targets with low...

We show that establishing an internal labor market by offering combined contracts across hierarchy levels strictly dominates external recruitment when workers are homogeneous. The reason is that only an internal labor market can exploit higher tier rents for incentive provision on lower tiers....

Previous work on moral-hazard problems has shown that, under certain conditions, bonus contracts create optimal individual incentives for risk-neutral workers. In our paper we demonstrate that, if a firm employs at least two workers, it may further benefit from combining worker compensation via...

Using a microeconomic model and data from the Establishment Panel of the German Institute for Employment Research, we analyze the optimal establishment size against the background of rent-seeking workers and the influence of works councils. The theoretical part shows that establishment size has...

I show that in competitive careers based on individual performance the least productive individuals may have the highest probabilities to be promoted to top positions. These individuals have the lowest fall-back positions and, hence, the highest incentives to succeed in career contests. This...

We analyze a two-player electoral contest game between a challenger and an incumbent. First, the challenger decides whether to choose a high-risk campaign (e.g., risky platforms, negative campaigning, an interactive Web technology) or a less risky one. In a second stage, both the challenger and...

We analyze a dynamic moral-hazard model to derive optimal sales force compensation plans without imposing any ad hoc restrictions on the class of feasible incentive contracts. We explain when the compensation plans that are most common in practice - fixed salaries, quota-based bonuses,...