Introduction In the standard economic treatment of the principal–agent problem, compensation systems serve the dual function of allocating risks and rewarding productive work. A tension between these two functions arises when the agent is risk averse, for providing the agent with effective work incentives often forces him to bear unwanted risk. Existing formal models that have analyzed this tension, however, have produced only limited results. It remains a puzzle for this theory that employment contracts so often specify fixed wages and more generally that incentives within firms appear to be so muted, especially compared to those of the market. Also, the models have remained too intractable to effectively address broader organizational issues such as asset ownership, job design, and allocation of authority. In this article, we will analyze a principal–agent model that (i) can account for paying fixed wages even when good, objective output measures are available and agents are highly responsive to incentive pay; (ii) can make recommendations and predictions about ownership patterns even when contracts can take full account of all observable variables and court enforcement is perfect; (iii) can explain why employment is sometimes superior to independent contracting even when there are no productive advantages to specific physical or human capital and no financial market imperfections to limit the agent's borrowings; (iv) can explain bureaucratic constraints; and (v) can shed light on how tasks get allocated to different jobs.

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Multitask Principal–Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design

http://lib.cufe.edu.cn/upload_files/other/4_20140522023331_3.pdf

Auditor size and audit quality

The author systematically examines one of the important issues of information — establishing the market price. He introduces the concept of «search» — where a buyer wanting to get a better price, is forced to question sellers. The article deals with various aspects of finding the necessary information.

Economics of Information

The resource-based approach is an emerging framework that has stimulated discussion between scholars from three research perspectives. First, the resource-based theory incorporates traditional strategy insights concerning a firm's distinctive competencies and heterogeneous capabilities. The resource-based approach also provides value-added theoretical propositions that are testable within the diversification strategy literature. Second, the resource-based view fits comfortably within the organizational economics paradigm. Third, the resource-based view is complementary to industrial organization research. The resource-based view provides a framework for increasing dialogue between scholars from these important research areas within the conversation of strategic management. Resource-based studies that give simultaneous attention to each of these research programs are suggested.

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The resource-based view within the conversation of strategic management

Under anarchy, uncoordinated competitive theft by “roving bandits” destroys the incentive to invest and produce, leaving little for either the population or the bandits. Both can be better off if a bandit sets himself up as a dictator—a “stationary bandit” who monopolizes and rationalizes theft in the form of taxes. A secure autocrat has an encompassing interest in his domain that leads him to provide a peaceful order and other public goods that increase productivity. Whenever an autocrat expects a brief tenure, it pays him to confiscate those assets whose tax yield over his tenure is less than their total value. This incentive plus the inherent uncertainty of succession in dictatorships imply that autocracies will rarely have good economic performance for more than a generation. The conditions necessary for a lasting democracy are the same necessary for the security of property and contract rights that generates economic growth.

https://www.cambridge.org/core/services/aop-cambridge-core/content/view/S0003055400100838

Dictatorship, Democracy, and Development.

Introduction 1. The property rights model 2. The public domain: rationing by waiting and price controls 3. Contract choice: the tenancy contract 4. Divided ownership 5. The old firm and the new organization 6. The formation of rights 7. Slavery 8. Wealth maximization constraints on property rights 9. Property rights and non-market allocation 10. Additional property rights applications 11. The property rights model: recapitulation References.

Economic analysis of property rights

PEOPLE will exchange only if they perceive what they get to be more valuable than what they give. To form such perceptions, the attributes of the traded items have to be measured. Some measurements are easy to obtain; others pose difficulties. For example, determining the weight of an orange may be a low-cost, accurate operation. Yet what is weighed is seldom what is truly valued. The skin of the orange hides its pulp, making a direct measurement of the desired attributes costly. Thus the taste and the amount of juice it contains are always a bit surprising. The grower, more knowledgeable than the consumer, may gain by making the surprise an unpleasant one. The potential errors in weighing the commodity and in assessing its attributes permit manipulations and therefore require safeguards. The costs incurred by the transactors will exceed those under joint maximization. A sampling of activities that arise solely because these costs are positive may hint at how costly the measurement of commodity attributes is.1 Had product information been costless, warranties would disappear since attribute levels and defects could be effortlessly identified at the time of exchange; fancy packaging (unless valued for its own sake) as well as the Consumer Report and the Good Housekeeping Seal would be super-

Measurement Cost and the Organization of Markets

This book models the emergence of the state, and the forces that shape it. State creation is bound to protection needs. A specialized protector-ruler is efficient, but is also self-seeking. Individuals will install a ruler only after they create a mechanism to control him. Among the offshoots of the organized protection are legal system and decision-making procedures that include voting. The initial 'state of nature' may gradually evolve into a rule-of-law state. The state endows individuals with rights by delineating what it will protect. Enforcement, however, is never perfect. People use third parties such as firms to enforce agreements. As commodities become standardized, scale economies increase. In order to exploit the economies of within-state enforcement, the state will expand the contact enforcement territory by treaty or by conquest. The force may explain the creation of rule-of-law empires.

A Theory of the State: Economic Rights, Legal Rights, and the Scope of the State

The article shows that innovations are induced, since they become more profitable with the expansion of output. The amount of resources devoted to innovating activity, however, is in general not the optimal one because of the pressure of two opposing forces. On the one hand, competition between potential innovators tends to make this amount too large, on the other, the inability of innovators to capture all the benefits tends to make the amount too small. When all benefits are captured by the innovator either there is no economic growth due to innovations or else innovators are the sole beneficiaries from that growth. When benefits are diffused the innovation will always lead to economic growth, but only by sheer coincidence will it lead to maximum growth, which may be missed because the innovation is introduced either too early or too late. The rate of growth is always positive if the innovation is introduced too late. It may fall to zero with too-early introduction or even become negative if innovational activity is subsidized.

Optimal Timing of Innovations

Because commodities as transacted are complex, tax statutes could not cover all margins subject to optimization A tax will induce, then, substitution within the commodity away from the taxed attributes and into the others The results of a test on cigarettes are consistent with our prediction that the effects of unit and ad valorem taxes will differ both from each other and from those predicted by the conventional model It is shown that, although the market will adjust in numerous changeable characteristics, the adjustment is constrained by the condition that the sum of the dollar value of the inefficiencies and of tax paid is minimized

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Yoram Barzel

Papers

Economic analysis of property rights

Measurement Cost and the Organization of Markets

A Theory of the State: Economic Rights, Legal Rights, and the Scope of the State

Optimal Timing of Innovations

An Alternative Approach to the Analysis of Taxation