Half of the jobs in the U.S. feature pay-for-performance. We derive novel incidence and optimum formulas for the overall rate of tax progressivity and the top tax rates on total earnings and bonuses, when such labor contracts arise from moral hazard frictions within firms. Optimal taxes account...

The provision of social incentives in the workplace, where performance benefits a charitable cause, has been frequently used in modern organizations. In this paper, we quantify the impact of social incentives on performance under two incentive schemes: piece rate and a winner-take-all...

This paper presents the results of a survey exploring the determinants of vacinees' confidence in COVID-19 vaccines and their motivations to become vaccinated. At the threatening rise of the highly infectious Omicron variant, in December 2021, we interviewed people in waiting lines of...

This paper is the first (to our knowledge) to analytically model the optimal contracting for a member of the board of directors who holds multiple directorships. Prior literature has found conflicting evidence on the overall effect of multiple directorships on shareholder welfare: busy board...

We explore experimentally a cognitive-effort channel through which defaults might influence behavior in an environment where the choice architect has misaligned incentives. Our experimental setting is an insurance market where the firm is better informed about the aggregate statistical risk...

We examine the effects of incentives in a simple model, where a set of rational agents works on a joint task. In the static model, we show that higher incentives (i.e., higher rewards for success) positively affect the success rate and the agents’ payoffs. This is in contrast to the dynamic...

Although relative performance feedback can positively influence employee performance, its effect tends to be mixed for employees who underperform compared to their peers. We conducted a field experiment testing whether basing relative performance feedback on inputs, which is relative performance...

The present study began with Jerry Feltham’s invitation to present at the Stanford Summer Camp in August 2003. As we were variously involved in related work on performance measurement and dynamic incentives, Peter, Jerry, Christian, and Florin teamed up and the result was Christensen, Feltham,...

We investigate the difference between monetary incentives and monetary gifts on employees’ performance using a firm-level field experiment. We randomly assign store managers of a German discount supermarket chain to two different groups. In the first treatment, the store managers receive a...

Albeit many scholars have studied the relationship between option-based incentives and corporate innovation, the results have been controversial. We divide corporate innovation into two dimensions: innovation inputs and outputs. Thereafter, we use propensity score matching and...

This study adopts behavioral contract theory through a mathematical model and clarifies the situation in which a fixed–salary contract is preferable to incentives–based one for the principal. Theoretically, the expected utility for the principal is higher under an incentives–based contract...

In contracts, the choice between vague standards and precise rules is central to both theory and practice. According to traditional contract theory, parties make this choice by balancing “front-end” transaction costs against “back-end” enforcement costs, apparently through a joint...

Diagnostic errors are prevalent and can result in severe patient harm. Identifying a correct diagnosis often necessitates significant diagnostic effort. Nonetheless, most physician payment schemes are procedure-based and do not account for diagnostic effort or accuracy, due to observability...

Empirical research on executive compensation has focused almost exclusively on the incentives provided to chief executive officers. However, firms are run by teams of managers, and a theory of the firm should also explain the distribution of incentives and responsibilities for other members of...

The potent support from China’s government provides opportunities for the development of China’s photovoltaic and wind power industry and promotes China to become the largest renewable energy investor. Based on the data of 62 listed companies from 2007 to 2020, this paper builds fixed-effect...

This paper explores potential realization of gains by hospitals that are managed on a day-to-day basis by external organizations under formal contracts. It draws from the incentives literature, which postulates that managers of firms where ownership is separated from control will employ an input...

This study aims to obtain findings of the effect of work experience, competence, and work motivation on employee performance. This type of research uses quantitative research methods with descriptive analysis and takes measurements through an ordinal scale. The data collection technique used is...

We examine the effect of board members with venture capital experience (i.e., VC directors) on executive incentives at non-VC-backed public firms. VC directors serving on the compensation committee are associated with greater CEO risk-taking incentives (i.e., vega) and pay-for-performance...

Half of the jobs in the U.S. feature pay-for-performance. We derive novel incidence and optimum formulas for the overall rate of tax progressivity and the top tax rates on total earnings and bonuses, when such labor contracts arise from moral hazard frictions within firms. Optimal taxes account...

This paper proposes a simple economic intuition that the effectiveness of tournaments is closely related to the number of individuals participating in the competition. Specifically, tournaments with too few (too many) contestants are not conducive to stimulating efforts due to windfalls (sure...

The success of reverse referral service, whereby a city hospital transfers patients finishing operations to a community one for follow-up treatment, generally depends on the collaboration of these two levels of hospitals. Unfortunately, the free-riding effect in such collaboration may lead to an...

A central question in designing optimal policies concerns the assignment of individuals with different observable characteristics to different treatments. We study this question in the context of increasing workers' performance by using targeted incentives based on measurable worker...

This paper incorporates egocentric comparisons into a human capital accumulation model and studies the evolution of positive self image over time. The paper shows that the process of human capital accumulation together with egocentric comparisons imply that positive self image of a cohort is...

This paper analyzes the implications of worker overestimation of productivity for firms in which incentives take the form of tournaments. Each worker overestimates his productivity but is aware of the bias in his opponent's self-assessment. The manager of the firm, on the other hand, correctly...

This article has a two-fold purpose. First, we investigate whether the CEOs’ risk-taking incentives are associated with better concurrent firm performance. Second, we examine the impact of gender on the aforementioned relationship. We find solid empirical evidence that CEOs’ risk-aversion...

The hottest topic in corporate governance circles today involves company commitments to and pursuit of ESG (environmental, social, and governance) initiatives in addition to the traditional pursuit of profits. One facet of this debate has to do with how to motivate executives to pursue ESG...

I examine the broader political economy and the impact classical-liberal ideology has had on education policy decisions in the Western and wider world. I then explore how incentives influence behaviours in the broader economy, before finally investigating what the current literature says about...

Based on the principal-agent model, the continuous time optimal contract with asymmetric information is studied in the case of competition, cooperation, and neutrality between two agents, and the optimal behavior selection and incentive mechanism of agents are analyzed. The results show that the...

We present a modified principal-agent model to identify a link between the anticipated likelihood of future CEO turnover and the optimal sensitivity of incentive pay to firm performance. The analysis focuses on the optimal sequence of standard one-period incentive contracts when CEO effort...

This paper examines the role that managerial equity incentive schemes have on corporate innovation outcomes in developing economies. Utilizing a large and representative sample of Chinese publicly listed firms, we show that while managerial equity incentive schemes have a positive average effect...

We develop a small open economy DSGE model to study the macro welfare effects of flexible labor contracts for an economy in a currency union. The framework exhibits two sectors: a fixed sector and a flex sector. The fixed sector offers contracts that exhibit rigidities in working-hours and wages...

The purpose of this study is to investigate the mediating role of reflective moral attentiveness in the relationship between financial incentives idiosyncratic deals and unethical pro-organizational behaviors in the pharmaceutical sales sector. In this study, data collected from 310 sales...

I study an optimal design of monetary incentives in experiments where incentives are a treatment variable. I introduce the Budget Minimization problem in which a researcher chooses the level of incentives that allows her to detect a predicted treatment effect while minimizing her expected...

We investigate the effectiveness of tournament theory based on the age gap between the CEO and the top management team (TMT) in Korean firms. While tournament incentives encourage managers to work harder to improve their performance, their effects may differ on executives’ sociological and...

An agency model is proposed that identifies the optimal executive compensation scheme for a business where the owner's delegation of investment decision-making to the manager gives rise to a two-dimensional moral hazard problem relating to the levels of managerial effort and innovation,...