How does imperfect contractibility of preferences influence the governance of a contractual relationship? We analyze a two-party decision-making problem where the optimal decision is unknown at the time of contracting. In consequence, instead of contracting on the decision directly, the parties...

Traditionally, researchers have had difficulty testing the relationship between the degree of risk or uncertainty in workers' environments and incentive pay. The authors employ Prendergast's (2002) theory that incorporates the delegation of worker authority into the principal-agent model to...

A standard tournament contract specifies only tournament prizes. If agents' performance is measured on a cardinal scale, the principal can complement the tournament contract by a gap which defines the minimum distance by which the best performing agent must beat the second best to receive the...

This paper considers a financing problem for an innovative firm that is launching a web-based platform. The entrepreneur, on one hand, faces a large degree of demand uncertainty on his product and on the other hand has to deal with incentive problems of professional blockchain participants who...

Within the context of expected utility and in a discrete loss setting, we provide a complete account of the demand for insurance by strictly-risk averse agents and risk-neutral firms when they enjoy limited liability. When exposed to a bankrupting, binary loss and under actuarially fair prices,...

The authors empirically test Prendergast’s (2002) theory that incorporates the delegation of worker authority into the principal-agent model to explain the lack of consistent empirical support for a tradeoff between risk and incentives. Using data from the 1998 British WERS, the authors...

Strategic projects are mostly executed by teams of specialists, each of whom are responsible for the completion of specialized, uncertain, and, in many cases, interdependent tasks, i.e. a challenging triad. Unfortunately, senior management can rarely determine, or verifiably measure, the true...