Journal ArticleDOI
Moral Hazard in Teams
TLDR
In this article, the authors study moral hazard with many agents and focus on two features that are novel in a multiagent setting: free riding and competition, and show that competition among agents (due to relative evaluations) has merit solely as a device to extract information optimally.Abstract:
This article studies moral hazard with many agents. The focus is on two features that are novel in a multiagent setting: free riding and competition. The free-rider problem implies a new role for the principal: administering incentive schemes that do not balance the budget. This new role is essential for controlling incentives and suggests that firms in which ownership and labor are partly separated will have an advantage over partnerships in which output is distributed among agents. A new characterization of informative (hence valuable) monitoring is derived and applied to analyze the value of relative performance evaluation. It is shown that competition among agents (due to relative evaluations) has merit solely as a device to extract information optimally. Competition per se is worthless. The role of aggregate measures in relative performance evaluation is also explored, and the implications for investment rules are discussed.read more
Citations
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Journal ArticleDOI
Team Incentives and Performance: Evidence from a Retail Chain
TL;DR: In this paper, a field experiment with a retail chain (1,300 employees, 193 shops), randomly selected sales teams received a bonus, which increased both sales and number of customers dealt with by 3 percent.
Journal ArticleDOI
The Limits of Equality: Insights from the Israeli Kibbutz
TL;DR: In this paper, the authors investigated the economic and sociological forces underlying the persistence of the Israeli kibbutzim, communities based on the principle of income equality, and found that productive individuals are the most likely to leave and a kibby's wealth serves as a lock-in device that increases the value of staying.
Journal ArticleDOI
Playing with the Good Guys: A Public Good Game with Endogenous Group Formation
TL;DR: This article presented a public good game experiment in which subjects choose between two group types: in blue groups, subjects receive a fixed extra payoff; in red groups, this extra payoff is donated, instead, to the Red Cross.
Journal ArticleDOI
Capital control, debt financing and innovative activity
Dirk Czarnitzki,Kornelius Kraft +1 more
TL;DR: In this article, the authors discuss theoretically the different incentives of manager- versus owner-controlled firms for investment into innovative activity and analyze the role of debt financing in this area, and present the results from an empirical study on the determinants of innovative activity measured by patent applications.
Journal ArticleDOI
Rewarding Sequential Innovators: Prizes, Patents, and Buyouts
TL;DR: In this article, the authors present a model of cumulative innovation in which firms are heterogeneous in their research ability and study the optimal reward policy when the quality of the ideas and their subsequent development effort are private information.
References
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Posted Content
Production, information costs, and economic organization
Armen A. Alchian,Harold Demsetz +1 more
TL;DR: In this paper, the authors present a set of reprint articles for which IEEE does not hold copyright. Full text is not available on IEEE Xplore for these articles, but full text can be found on the Internet Archive.
Journal ArticleDOI
Moral Hazard and Observability
TL;DR: In this article, the role of imperfect information in a principal-agent relationship subject to moral hazard is considered, and a necessary and sufficient condition for imperfect information to improve on contracts based on the payoff alone is derived.
Posted Content
The Economic Theory of Agency: The Principal's Problem.
TL;DR: The canonical agency problem can be posed as follows as discussed by the authors : the agent may choose an act, aCA, a feasible action space, and the random payoff from this act, w(a, 0), will depend on the random state of nature O(EQ the state space set), unknown to the agent when a is chosen.
Journal ArticleDOI
Reexamination of the perfectness concept for equilibrium points in extensive games
TL;DR: The concept of perfect equilibrium point has been introduced in order to exclude the possibility that disequilibrium behavior is prescribed on unreached subgames [Selten 1965 and 1973]. Unfortunately this definition of perfectness does not remove all difficulties which may arise with respect to unreached parts of the game.
Journal ArticleDOI
Good News and Bad News: Representation Theorems and Applications
TL;DR: In this article, a notion of "favorableness" of news is introduced, characterized, and applied to four simple models: the arrival of good news about a firm's prospects always causes its share price to rise, more favorable evidence about an agent's effort leads the principal to pay a larger bonus, buyers expect that any product information withheld by a salesman is unfavorable to his product, and bidders figure that low bids by their competitors signal a low value for the object being sold.