In this paper I examine agency theories and the impact it has on corporate life today. I find substantial support (in research and real life) the teaching itself has contributed to greed and the “agency culture” that has driven many firms to their doom. When it comes to game theory and experiments people tend to be self-serving at different levels. Outside these applications most people are als...

In this paper, we use probabilistic methods of excursion theory for Lévy processes in order to value some exotic options in general exponential Lévy models. AMS 2000 Subject Classification : Primary: 60G51, 91B28, 91B70. JEL Classification: C13.

When agents have quasi-linear preferences, every incentive compati-ble social choice function can be implemented by a simple extensive form mech-anism, even if agents are allowed to use mixed strategies. The second stage of themechanism, which is used to elicit the agents' true preferences, is not reached inequilibrium; it gives agents strict dominant strategies, so equilibrium ...

It is well known that a social choice function is truthfully implementable in Bayesian Nash equilibrium if and only if it is incentive compatible. However, in general it is not possible to rule out other equilibrium outcomes, and additional conditions, e.g., Bayesian monotonicity, are needed to ensure full implementation. We argue that this multiplicity problem is not very severe for virtual Ba...

We consider the class of Bayesian environments with one-dimensional private signals and interdependent valuations. For these environments, we fully characterize the set of interim efficient mechanisms which satisfy interim incentive compatibility and interim individual rationality constraints. In these mechanisms, the allocation rules assign probability one to an alternative that maximizes the ...

Trust as a Signal of a Social Norm and the Hidden Costs of Incentive Schemes An explanation for motivation crowding-out phenomena is developed in a social preferences framework. Besides selfish and fair or altruistic types a third type of agents is introduced: These ‘conformists' have social preferences if they believe that sufficiently many of the others do too. When there is asymmetric inform...

When rationality is bounded, a variety of factors may influence how far a choice is from optimal. We examine the willingness to search among alternatives. We find fixed individual differences in this temperament measure. People may be usefully typed according to how they obtain improved choices. More patient subjects obtain improvement by effectively using decision resources, performing better ...

Introducing concerns about land fertility for landlords in a Principal –Agent model of sharecropping with moral hazard, we show that the optimal contract under limited commitment reflects a trade-off between production and land quality maintenance. Using data from the Philippines, a model where the leasing out and contract choices are simultaneous is estimated and avoids the selectivity bias of...

Do Professionals Choke Under Pressure? High rewards or the threat of severe punishment do not only provide incentives to exert high levels of effort but also create pressure. Such pressure can cause paradoxical performance effects, namely performance decrements despite strong incentives and high motivation. By analyzing the performance of professional football players on a well-defined task, na...

On the Hidden Costs of Incentive Schemes By enriching a principal-agent model it is shown that the introduction of monetary incentives may reduce an agent’s motivation. In a first step, we allow for the possibility that some agents stick to unverifiable agreements. The larger the fraction of reliable agents, the lower powered will then be the optimal incentive scheme and fixed wages become opti...