It is well known that if costlessly enforceable contracts regulate all of the actions of economic actors that a ect the well being of others, competitive equilibria are Pareto e cient regardless of the distribution of wealth. However where actions such as risk taking and hard work are not subject to such contracts, the assignment of residual claimancy over income streams and control over assets...

PPLive is a popular P2P video system used daily by millions of people worldwide. Achieving this level of scalability depends on users making contributions to the system, but currently, these contributions are neither verified nor rewarded. In this paper, we describe the design and implementation of Contracts, a new, practical approach to providing contribution incentives in P2P live streaming s...

In the one-shot trust or investment game without opportunities for reputation formation or contracting, economic theory predicts no trusting because there is no incentive for trustworthiness. Under these conditions, theory predicts (a) no effect of pre-play communication, and (b) universal preference for moderate cost binding contracts over interacting without contracts. We introduce the opport...

Relationships between an assembler and a vendor in a supply chain are investigated in two-period models when the assembler wants to reduce response time by incentive systems. The assembler may offer myopic or farsighted incentive contracts to the vendor, under short-term or long-term relationships. Incentive schemes, effort levels, and expected payoffs under different perspectives and relations...

The Investment Advisers Act of 1940 (as amended in 1970) prohibits mutual funds in the US from o ering their advisers asymmetric \incentive fee" contracts in which the advisers are rewarded for superior performance via-a-vis a chosen index but are not correspondingly penalized for underforming it. The rationale o ered in defense of the regulation by both the SEC and Congress is that incentive f...

I study the provision of incentives in dynamic moral hazard models with hidden actions and possibly hidden states. I characterize implementable contracts by establishing the applicability of the first-order approach to contracting. Implementable contracts are history dependent, but can be written recursively with a small number of state variables. When the agent’s actions are hidden, but all st...

This study separates and compares sorting and incentive effects and analyses their contingencies in a real-effort laboratory experiment. Depending on the treatment, subjects have a choice between a piece rate, a budget-based and a fixed pay, or have no choice but are assigned to a compensation scheme. The results suggest that sorting effects have a greater impact on productivity than incentive ...

This paper develops a positive model of informal justice in which rewards and punishments are not determined by an ex ante optimal contract but instead express the ex post moral sentiments of the arbitrating party. In our model, a third party arbitrator mediates a one-shot relationship between two players, one of whom can exert an externality on the other. Importantly, formal contracts are not ...

Bushman and Smith (2001, this issue) provide a useful review of research on the role of accounting in management compensation contracts and an appealing future research agenda that builds on recent research using a cross-country approach. This paper rounds out their discussion by highlighting some limitations of their research agenda, providing a critical review of the contributions of accounti...

This paper investigates the optimality of sharp incentives in contracts where output prices are set at the time of contracting but are random in nature. It shows that when prices are specified with error, schemes involving sharp incentives might result in substantial deviations from first-best output levels. The randomness of prices creates arbitrage opportunities that are exploited by agents p...