We study a team whose members choose a joint project and exert individual efforts to implement it. Members have private information about the productivities of alternative projects. We find conditions under which information fails to be shared and the most productive project fails to be selected. While the concealment of information can be efficient, the team’s incentive to conceal is inefficie...

We study how organizational complexity affects managerial behavior, breaking it down into vertical hierarchy and degree of specialization. We exploit a novel dataset on the organizational structure of the US asset management industry. We show that more hierarchical structures reduce the incentive to collect soft information by investing less in closely-located firms. This reduces portfolio conc...

Job Assignments under Moral Hazard: The Peter Principle Revisited The Peter Principle captures two stylized facts about hierarchies: first, promotions often place employees into jobs for which they are less well suited than for that previously held. Second, demotions are extremely rare. Why do organizations not correct ‘wrong’ promotion decision? This paper shows in a complete contracting setti...

We study incentive provision in a model of securities issuance with an informed issuer and uninformed investors. We show that the presence of an informed intermediary may increase surplus even if we allow for collusion between the intermediary and the issuer. Collusion is neutralized by introducing a misalignment between the interests of the issuer and those of the intermediary. To achieve this...

We study a mechanism design problem where arbitrary restrictions are placed on the sets of first-order beliefs of agents. Calling these restrictions ∆, we use ∆-rationalizability (Battigalli and Siniscalchi (2003)) as our solution concept, and require that a mechanism virtually implement a socially desirable outcome. We obtain two necessary conditions, ∆-incentive compatibility and ∆-measurabil...

We propose a simple mechanism that sustains full cooperation in one-shot social dilemmas among a finite number of self-interested agents. Players sequentially decide whether to contribute to a public good. They do not know their position in the sequence, but observe the actions of some predecessors. Position uncertainty provides an incentive to contribute in order to induce potential successors...

This paper examines the incentive effects of different payoff structures in the National Hockey League. A rule change prior to the 1999-2000 season, which changed the way that teams were awarded points in overtime games, provides a natural experiment to test the reaction of teams to a change in the payoff structure. The rule change had the desired effect of increasing excitement during overtime...

We develop a model of interlocking bilateral relationships between upstream firms (manufacturers) that produce differentiated goods and downstream firms (retailers) that compete imperfectly for consumers. Contract offers and acceptance decisions are private information to the contracting parties. We show that both exclusive dealing and vertical integration between a manufacturer and a retailer ...

This paper studies voting over quadratic taxation when income is fixed and taxation non distortionary. We first show that, if a Condorcet winner (a tax function preferred by a majority to any other feasible tax function) exists, it involves maximum progressivity. We then give necessary and sufficient conditions on the income distribution for a Condorcet winner to exist, and show numerically tha...

Exchange of patents between firms increasingly influence competition. Such cross-licensing deals have traditionally raised antitrust concerns, since they can be used to control market shares and prices, and create entry barriers. We argue that cross-licensing is a device to establish multimarket contact and is likely to raise antitrust concerns only in so far as multimarket contact does. Since ...