ABSTRACT We study how the precision of managers’ private post-contract pre-decision information affects pay–performance relation. Endogenizing environment, we find that firms may optimally tie executive pay closer to firm performance as agency problems become more pronounced. Specifically, varying parameters measuring severity problem, identify parameter regions where with pronounced combine un...

When only group performance is observable, incentives depend on the distribution of payments between group members. This distribution differs between firms. In this paper, we analyze whether the coexistence of various group performance-based payment schemes on the labor market can be related to agents’ heterogeneity. We test by a laboratory experiment whether agents self-select between a compet...

We measure the importance of risk within a firm that pays its workers piece rates, exploiting data from payroll records and a series of field experiments conducted within the firm. These data are used to identify and estimate worker preferences, abilities and risk exposure. These estimates are combined to measure the workers’ cost of risk: their willingness to pay to avoid risky contracts. We f...

This paper reports on the results of an experiment testing whether the agents selfselect between a competitive payment scheme and a revenue-sharing scheme depending on their inequity aversion. Average efficiency should be increased when these payment schemes are endogenously chosen by agents. We show that the choice of the competition is negatively affected by disadvantageous inequity aversion ...

The two major paradigms in the theoretical agency literature are moral hazard (i.e., hidden action) and adverse selection (i.e., hidden information). Prior research typically solves these problems in isolation, as opposed to simultaneously incorporating both adverse selection and moral hazard features. We formulate two complementary generalized principalagent models that incorporate features ob...

When contracting is not possible, a preference for fair exchange can generate efficient exchange, fully exhausting the potential gains from trade — or no exchange at all, leaving all gains from trade unexploited. A profit-maximizing firm offers a wage to a fair-minded worker, who then chooses how much effort to exert. The Rotten Firm theorem says: if the worker cares sufficiently about fairness...

New observations of the eclipsing nova V1494 Aql were analysed in order to estimate the effect of the optical companion located 1. ′′4 southwest. R and I-band images (stellar FWHM ≈ 1. ′′2 − 1. ′′4) taken close to the primary minimum were used to determine relative magnitude differences between the nova and the companion, which were found to be ∆R ≈ 0. m20 and ∆I ≈ 0. m52 (in the sense nova min...

The market for retail financial products (e.g. investment funds or insurances) is marred by information asymmetries. Clients are not well informed about the quality of these products. They have to rely on the recommendations of advisors. Incentives of advisors and clients may not be aligned, when fees are used by financial institutions to steer advice. We experimentally investigate whether volu...

Mycoplasma fermentans strains differ in the profile of choline-containing phosphoglycolipids (PGL) present in their cell membrane. MfGL-II [Zähringer et al. (1997) J. Biol. Chem. 272, 26262-26270] was found to be the major PGL in most strains tested. However, in the pulmonary isolates, M52 and M39 the major choline-containing PGLs were MfGL-I [Matsuda et al. (1994) J. Biol. Chem. 269, 33123-331...