Download or read book Essays on Incentive Provisions written by Lan Shi and published by . This book was released on 2004 with total page 270 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Contract Design and Incentive Provision written by Eva I. Hoppe-Fischer and published by Springer. This book was released on 2019-02-19 with total page 211 pages. Available in PDF, EPUB and Kindle. Book excerpt: Contract theory, which emphasizes the importance of unverifiable actions and private information, has been a highly active field of research in microeconomics in the last decades. This thesis is divided into two parts. Part I consists of three chapters that study contract-theoretic models which are motivated by the classic procurement problem of a principal who wants an agent to deliver a certain good or service. In such models it is typically assumed that decision makers are interested in their own monetary payoffs only. Moreover, they have unlimited cognitive abilities and behave in a perfectly rational way. Yet, in practice people often do not behave this way. While empirical research is very difficult in contract theory, laboratory experiments have recently turned out to be an important source of data. In Part II, three experimental studies are presented that investigate contract-theoretic problems brought up in Part I.

Download or read book Essays on Contract Design and Incentive Provision written by Eva I. Hoppe and published by . This book was released on 2011 with total page 211 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Empirical Contracting and Development written by Amrita Bihari Ahuja and published by . This book was released on 2009 with total page 380 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation's first essay explores the design and effects of incentive contracts in contexts with multiple products and multiple parties. Using data from a multi-product manufacturer in India, I test how incentives to two parties in its distribution network--salespersons and retailers--affect product sales. While profit maximization suggests equalization of returns, sales increases from salesperson incentives are six times those for retailer incentives. I provide evidence that differences in substitutability across products for the two parties, and the consequent differential costs of incentive provision, explain this disparity. The essay also traces the mechanisms by which incentives affect sales. Shifts in the allocation of salesperson effort between products and between retailers in different geographies, complementarities in effort, and information revelation through repeated interactions are all shown to be important. Finally, the essay argues that firms take these hidden incentive costs and interactions between parties into account when designing incentive systems.

Download or read book Essays on Incentives for Effort Provision in Principal Agent Settings written by Troy A. Kravitz and published by . This book was released on 2013 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt: Situations in which multiple parties with competing preferences interact are endemic throughout society. These essays consider the problem of a principal who seeks to induce self-interested agents to exert effort or promise contributions. The principal's task is to create an incentive structure that aligns the agents' preferences with his own. Chapter 1 considers a principal seeking to induce agents to exert costly, unobservable effort when the output they produce is unverifiable. The firm's solution is to hire multiple workers for some tasks and compare the output produced by the agents. The optimal mechanism bundles multiple tasks together to reduce the cost of monitoring and conditions wage payment for any task upon satisfactory completion of all tasks. The optimal mechanism is not efficient as the principal prefers greater duplication of tasks in exchange for reduced worker rents. Asymptotically, as jobs grow large, the firm approximates its first-best payoffs from the contractible effort benchmark. It is only in the limit that the optimal mechanism is also efficient. Chapter 2 studies the campaign finance landscape following recent changes to the law. A discriminatory all-pay contest model with a contribution cap is used to study legislative and lobbying behavior. The principal, a strategic lawmaker, is central to the analysis. The lawmaker both designs the prize the lobbyists are competing to obtain -- and, in doing so, determines their valuations for the prize -- and determines the terms of the prize's allocation. Contrary to existing work, expected contributions always increase as the contribution cap is relaxed. The effect on policy is more nuanced and depends on whether the cap is binding. The analysis highlights that a decrease in competitive forces, for example, from one lobbyist being richer or valuing the prize more, can be only partially offset by providing a discriminatory benefit to the other lobbyist. The strategic lawmaker endeavors to prevent such an imbalance from arising in the first place.

Download or read book Three Essays on the Impact of Exogenous and Persistent Changes on the Provision of Incentives written by Vincent Tena and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In presence of an agency friction, incentive contracts are designed to align the manager's objectives with those of the owner of the firm. However, the contractual environment is subject to shocks beyond the scope of the manager that impact the future profitability of the firm. These shocks can be due for instance to a strengthening of regulations, changes at the market-level, or the emergence of a new alternative to the manager. Hence, it raises the question how contracts are designed when such shocks are anticipated at the contractual date. In order to understand this effect, we conduct three studies. In the first paper, we explore how an incentive contract evolves at the emergence of automation technologies that can replace the manager in the context of asset management. We study a continuous time principal-agent problem where the performance of an asset is determined by the manager's unobserved effort, and where the automation technology emerges in a uncertain future. Our model suggests that the empirically observed layoffs that accompany the emergence ofautomation technology may have a contractual foundation. For the second study, we explore how changes in the agent's ability to divert cash flow impact an optimal contract design. We build a continuous-time principal-agent model where the agent can divert cash flow out of the owner's sight. While it is straightforward that mitigating the agency friction is valuable for the firm's owner, its effect on the provision of incentives throughout the contractual relationship is unclear. First, our result suggests that the compression of the bonuses at the advent of the shock: the reduction (respectively, increase) of the expected bonus of good (respectively, poor) performers. Second, our analysis also predicts the regulation-induced retention of a poor performer, defined as maintaining an agent in place while his poor performance would have induced his dismissal in the absence of the shock on the benefitof cash-flow diversion. In the third study, we continue the previous investigation with an empirical study. We analyze the Compensation Discussion and Analysis introduced for the 2007 proxy season. We focus on how this reform has impacted the dismissal decision in S&P 500 non-financial firms. We find that the introduction of the CD&A act has significantly reduced the probability of forced CEO dismissal in S&P 500 non-financial firms. While prior literature has shown that exogenous shocks at the industry level impact the dismissal decision, we document that changes in the regulatory environment also matter.

Download or read book Essays on Dynamic Incentive Design written by Mustafa Dogan and published by . This book was released on 2017 with total page 336 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays that examine incentive problems within various dynamic environments. In Chapter 1, I study the optimal design of a dynamic regulatory system that encourages regulated agents to monitor their activities and voluntarily report their violations. Self-monitoring is a private and costly process, and comprises the core of the incentive problem. There are no monetary transfers. Instead, the regulator (she) uses future regulatory behavior for incentive provision. When the regulator has full commitment power, she can induce costly self-monitoring and revelation of "bad news" in the initial phase of the optimal policy. During this phase, the agent is promised a higher continuation utility (in the form of future regulatory approval) each time he discloses "bad news." If the regulator internalizes self-monitoring costs, the agent is either blacklisted or whitelisted in the long run. When she does not internalize these costs, blacklisting is replaced by a temporary probation state, and whitelisting becomes the unique long run outcome. This result suggests that whitelisting, which may appear to be a form of regulatory capture, may instead be a consequence of optimal policy. In Chapter 2, I study the dynamic pricing problem of a durable good monopolist with commitment power, when a new version of the good is expected at some point in the future. The new version of the good is superior to the existing one, bringing a higher flow utility. The buyers are heterogeneous in terms of their valuations and strategically time their purchases. When the arrival is a stationary stochastic process, the corresponding optimal price path is shown to be constant for both versions of the good, hence there is no delay on purchases and time is not used to discriminate over buyers, which is in line with the literature. However, if the arrival of the new version occurs at a commonly known deterministic date, then the price path may decrease over time, resulting in delayed purchases. For both arrival processes, posted prices is a sub-optimal selling mechanism. The optimal one involves bundling of both versions of the good and selling them only together, which can easily be implemented by selling the initial version of the good with a replacement guarantee. Finally, Chapter 3 examines the question under what conditions can automation be less desirable compared to human labor. We study a firm that has to decide between a human-human team and a human-machine team for production. The effort choice of a human employee is not observed by the manager, therefore the incentives need to be properly aligned. We argue that, despite the desirable benefits resulting from the partial substitution of labor with automated machines such as less costly machine input and reduced scope of moral hazard, the teams with only human employees can, under some conditions, be more preferred over the human-machine teams. This stems from the fact that, in all-human teams, the principal, through the selection of incentive scheme, can control the interaction among the agents and get benefit from the mutual monitoring capacity between them. The automation, however, eliminates this interaction and shuts down a channel that can potentially help to mitigate the overall agency problem.

Download or read book Essays on Incentive Designs to Improve Market Performance written by Daniel Joseph Aronoff and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation is composed of three chapters. Each essay describes and models the structure of a market; identifies an inefficiency in outcomes and proposes an incentive scheme to reduce the inefficiency. First Chapter: Coordination Problems, Leverage Constraints and Smart Contract Solutions for the Repo Market, co-authored with Robert M. Townsend. We identify two inefficiencies in the US treasury repo market and propose solutions. In the first part we develop an empirically founded model of the repo market which displays multiple equilibria. In the second part we explain how the interaction of two distinct financial regulations has caused the unintended consequence of limiting the capacity of broker-dealers to intermediate repo transactions. In the third part we propose smart contract designs that address each inefficiency. The first contract structures the timing of contract commitments to induce a welfare maximizing equilibrium. The second contract replaces a chain of repo contracts with a single contract that reduces the impact of repo on broker-dealer balance sheets, which increases the volume of repo a broker-dealer can intermediate before hitting a regulatory bound. The replacement contract preserves the allocation of risk and payoffs. Our contracts can be implemented when money and treasuries are appended to programmable electronic ledgers. Second Chapter: Conservation Priorities and Environmental Offsets: Markets for Florida Wetlands, co-authored with Will Rafey. We estimate a model for an existing decentralized market in Florida wetlands in which land developers purchase offsets from producers, who enhance wetlands. Offset values are aggregated over environmental attributes at fixed exchange ratios to preserve regional no net loss. Producers incur a sunk cost and are awarded offsets over time. We find substantial private gains from trade. We estimate a local flood externality generated by wetlands, which is not covered by current regulations, and which is exacerbated by a spatial separation of the urban locations of impact from the rural locations of offset production. We propose a localized Pigouvian tax on offset transactions which would have prevented $800 million of new flood damage over a 20-year span while preserving more than two-thirds of the private gains from trade. Third Chapter: ADESS: A Proof-of-Work Blockchain Protocol Modification to Deter Double-Spend Attacks, co-authored with Isaac Ardis. A principal vulnerability of a proof-of-work (PoW) blockchain is that an attacker can re-write the history of transactions by forking a previously published block and building a new chain segment containing a different sequence of transactions. If the attacker's chain has the most cumulative mining puzzle difficulty, nodes will recognize it as canonical. We propose a modification to PoW protocols, called ADESS, that contains two novel features which increase the cost of launching a double-spend attack. The first innovation enables a node to identify the attacker chain by comparing the temporal sequence of blocks on competing chains. The second innovation is to penalize the attacker by requiring it to apply exponentially increasing hashrate in order to make its chain canonical. For any value of transaction, there is a penalty setting in ADESS that renders a double-spend attack unprofitable. We provide code to implement ADESS on the Ethereum Classic blockchain.

Download or read book Essays on the Outcomes Incentives and Regulations of Disclosure written by Joshua Alan Lee and published by . This book was released on 2014 with total page 163 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation examines the outcomes, incentives, and regulations surrounding the voluntary and mandatory disclosure of information by public firms. It contains three chapters. Using earnings conference calls as a prevalent setting to examine voluntary disclosure incentives and outcomes, Chapter 1 examines the market response to firms' scripting answers to questions they expect to receive during the question and answer (Q & A) session of the conference call. I hypothesize that firms script their Q & A responses when future performance is poor to avoid disclosing information that can be used in litigation against the firm or as a means of withholding bad news from investors. I develop a measure of Q & A scripting and find evidence that investors react negatively to scripted Q & A.I also find negative returns in the quarter following scripted Q & A suggesting that investors do not fully incorporate the negative signal into the stock price at the time of the conference call. Lastly, I provide evidence of a negative association between Q & A scripting and unexpected earnings for the two quarters following the conference call, suggesting that the negative reaction to scripted calls is warranted given the realization of negative future outcomes. Chapter 2 then focuses on the incentives for firms to provide disclosures prior to raising capital in seasoned equity offerings. Seasoned equity offerings involve significant information asymmetry between the firm and potential investors. Firms can reduce information asymmetry and the cost of obtaining financing by disclosing detailed plans for how the offering proceeds will be used to generate a return for investors. However, disclosure of forward-looking strategic information is costly. A policy of full disclosure can allow competitors to obtain and use proprietary information to the detriment of the firm or can preclude investors from investing in the offering if they disagree with the chosen strategy of the manager. I argue that managers are likely to disclose only if the expected benefits of disclosure outweigh the expected costs. I expect the benefits of disclosure are the lowest for high-ability managers. High-ability managers can credibly convey firm value at the offering date and enjoy lower levels of information asymmetry. Low-ability managers, on the other hand, cannot credibly convey the value of the offering resulting in high levels of information asymmetry at the time of the offering. I provide evidence that low-ability managers are more likely to disclose plans for the offering proceeds than high-ability managers to reduce information asymmetry and the cost of obtaining funds. Finally, Chapter 3 examines the effect of regulation on the disclosure and reporting decisions of banking institutions. All public firms, including banks, must register their securities with the Securities and Exchange Commission (SEC) if they meet certain thresholds. Registered firms must disclose financial information and adhere to strict reporting requirements. These firms are also subject to regulations such as the Sarbanes Oxley Act, which requires costly attestation of the adequacy of the firm's internal controls. In 2012, the Jumpstart Our Business Startups (JOBS) Act loosened the requirements for banks to register with the SEC. The JOBS Act raised the previous registration threshold of 300 shareholders of record to 1,200 shareholders of record, allowing banks with between 300 and 1,200 shareholders of record the opportunity to deregister their securities without incurring the costs of reducing their shareholders of record to be below the prior threshold. Within the first six months following the JOBS Act, 89 banks deregistered from the SEC, which is large given that only 142 banks deregistered over the ten years prior to the Act. We hypothesize that banks deregister to take advantage of private benefits of control. We find that banks deregistering after the Act have significantly lower institutional ownership, more insider trading and insider loans, and do not display significantly lower asset growth. In contrast to positive returns during pre-JOBS Act deregistration announcements, announcement returns for post-JOBS Act deregistrations are insignificant. By reducing the costs of deregistration, the Act likely allowed banks to capture private benefits while increasing the attractiveness of deregistration for higher growth banks.

Download or read book Three Essays on Economic Incentive Mechanisms written by Yeon-Koo Che and published by . This book was released on 1991 with total page 232 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Production Performance and Payment written by Nadja Vanessa Kairies-Schwarz and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Incentive Contracts Earnings Management Expectation Management and Related Issues written by Jie Gao and published by Open Dissertation Press. This book was released on 2017-01-28 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation, "Essays on Incentive Contracts, Earnings Management, Expectation Management and Related Issues" by Jie, Gao, 高洁, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. DOI: 10.5353/th_b4327865 Subjects: Corporate profits Disclosure of information Compensation management

Download or read book Property Rights Incentives and Regulations written by Sabrina Auci and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Information and Incentives written by Juan Pablo Xandri Antuña and published by . This book was released on 2013 with total page 168 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis studies problems of belief and information formation of agents, and its effect on incentive provision in problems of experimental and mechanism design. Chapter 1 is based on joint work with Arun Chandrasekhar and Horacio Larreguy. In this chapter we present the results of an experiment we conducted in rural Karnataka, India, to get evidence on how agents learn from each other's actions in the context of a social network. Theory has mostly focused on two leading models of social learning on networks: Bayesian updating and local averaging (DeGroot rules of thumb) which can yield greatly divergent behavior; individuals employing local averaging rules of thumb often double-count information and, in our context, may not exhibit convergent behavior in the long run. We study experiments in which seven individuals are placed into a network, each with full knowledge of its structure. The participants attempt to learn the underlying (binary) state of the world. Individuals receive independent, identically distributed signals about the state in the first period only; thereafter, individuals make guesses about the underlying state of the world and these guesses are transmitted to their neighbors at the beginning of the following round. We consider various environments including incomplete information Bayesian models and provide evidence that individuals are best described by DeGroot models wherein they either take simple majority of opinions in their neighborhood Chapter 2 is based on joint work with Arun Chandrasekhar, and studies how researchers should design payment schemes when making experiments on repeated games, such as the game studied in Chapter 1. It is common for researchers studying repeated and dynamic games in a lab experiment to pay participants for all rounds or a randomly chosen round. We argue that these payment schemes typically implement different set of subgame perfect equilibria (SPE) outcomes than the target game. Specifically, paying a participant for a randomly chosen round (or for all rounds with even small amounts of curvature) makes the game such that early rounds matter more to the agent, by lowering discounted future payments. In addition, we characterize the mechanics of the problems induced by these payment methods. We are able to measure the extent and shape of the distortions. We also establish that a simple payment scheme, paying participants for the last (randomly occurring) round, implements the game. The result holds for any dynamic game with time separable utility and discounting. A partial converse holds: any payment scheme implementing the SPE should generically be history and time independent and only depend on the contemporaneous decision. Chapter 3 studies a different but related problem, in which agents now have imperfect information not about some state of nature, but rather about the behavior of other players, and how this affects policy making when the planner does not know what agents expects her to do. Specifically, I study the problem of a government with low credibility, who decides to make a reform to remove ex-post time inconsistent incentives due to lack of commitment. The government has to take a policy action, but has the ability to commit to limiting its discretionary power. If the public believed the reform solved this time inconsistency problem, the policy maker could achieve complete discretion. However, if the public does not believe the reform to be successful some discretion must be sacrificed in order to induce public trust. With repeated interactions, the policy maker can build reputation about her reformed incentives. However, equilibrium reputation dynamics are extremely sensitive to assumptions about the publics beliefs, particularly after unexpected events. To overcome this limitation, I study the optimal robust policy that implements public trust for all beliefs that are consistent with common knowledge of rationality. I focus on robustness to all extensive-form rationalizable beliefs and provide a characterization. I show that the robust policy exhibits both partial and permanent reputation building along its path, as well as endogenous transitory reputation losses. In addition, I demonstrate that almost surely the policy maker eventually convinces the public she does not face a time consistency problem and she is able to do this with an exponential arrival rate. This implies that as we consider more patient policy makers, the payoff of robust policies converge to the complete information benchmark. I finally explore how further restrictions on beliefs alter optimal policy and accelerate reputation building.

Download or read book Do Work Incentives Work written by Carolyn M. Wolff and published by . This book was released on 2013 with total page 157 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The three essays in this dissertation focus on the impacts of work incentives geared towards two very different segments of the labor market. The first essay, "Does Incentive Pay Alter Physician Effort? An Analysis of the Time and Treatment that Physicians Provide to Patients," examines the link between incentive pay and effort among a group of highly-skilled workers: physicians. The other two essays, "Exiting TANF in South Carolina after the Deficit Reduction Act" and "What Happened to Cash Assistance for Needy Families," focus on a group of generally low-skilled, low-wage workers: welfare recipients. "Exiting TANF in South Carolina after the Deficit Reduction Act " examines the impact of a recent welfare reform aimed at promoting employment and self-sufficiency on durations of welfare recipiency. "What Happened to Cash Assistance for Needy Families?" identifies trends in welfare recipiency and self-sufficiency over the past twenty years. While a number of studies have attempted to measure the impact of financial incentives on physician behavior, none has examined the impact of performance-based incentive pay on broad measures of physician effort. In "Does Incentive Pay Alter Physician Effort? An Analysis of the Time and Treatment that Physicians Provide to Patients." I use newly available data from the National Ambulatory Medical Care Survey from 2006 through 2008 to estimate the effect of three specific types of performance-based incentive pay -- productivity incentives, patient-centered incentives, and practice profiling incentives -- on both the time physicians spend with patients and the intensity with which physicians treat patients. Using a discrete factor approximation approach to control for the endogeneity of incentive pay, I am able to estimate the impact of these types of incentive pay on physician effort. I find that performance-based incentive pay is associated with physicians spending significantly less time with each patient. I also find some evidence that performance-based incentive pay impacts physicians' intensity of treatment. The Deficit Reduction Act of 2005 (DRA) narrowed and standardized the work and work readiness activities that satisfy the work requirement of the Temporary Assistance for Needy Families (TANF) program. In "Exiting TANF in South Carolina after the Deficit Reduction Act, " I use administrative data from South Carolina's TANF program and employ event history techniques with a difference-in-difference estimation framework to analyze the effect of this policy change. I find that the DRA's definition of work and work readiness activities reduced the likelihood of black recipients to exit the TANF program in South Carolina while increasing the likelihood of exit for non-black recipients. For blacks, this decrease in the hazard comes from a decrease in the likelihood of exit through employment. For non-blacks, the result stems from an increase in the hazards for administrative exits and for other income exits. I also find that the reform led to longer durations of TANF benefit receipt in South Carolina for black recipients and shorter durations of cash assistance for non-black recipients. A primary goal of welfare reform since the early 1990's has been to increase the self-sufficiency of welfare recipients. The essay "What Happened to Cash Assistance for Needy Families?, " coauthored with David. C. Ribar, examines trends in the characteristics and outcomes for recipient families to determine if welfare recipients are becoming more self-sufficient. Using annual public use data on AFDC and TANF households from the Department of Health and Human Services, we find both positive and negative trends over the past twenty years. We find that the size of the caseload has decreased, the fraction of the caseload with earned income has increased, and the average earnings of welfare recipients has increased. On the other hand, we find that the fraction of child-only cases has increased, the caseload has disproportionately dropped the least-skilled households, average benefits fell faster than earnings grew, and the majority of households that exit TANF have no earnings."--Abstract from author supplied metadata.

Download or read book Essays on Incentive Compensation and Advertising written by Doug Jin Chung and published by . This book was released on 2012 with total page 312 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Strategic Incentives for Information Revelation written by Ricardo Serrano-Padial and published by . This book was released on 2007 with total page 100 pages. Available in PDF, EPUB and Kindle. Book excerpt: Information has strategic value in most economic environments because individuals have private information relevant to the decisions of others. The performance of economic institutions therefore depends on the extent to which they efficiently lead agents to reveal their information. My dissertation consists of three essays on information revelation (and aggregation) in two types of institutions: exchange environments in which traders have private information regarding a good whose value is commonly known to be the same for all ex post, as in commonvalue auctions, and decentralized provision of public goods. The first essay analyzes double auctions designed to model prediction markets. I identify conditions under which the equilibrium price in the model fully reveals the asset's value. The second essay deals with the lack of liquidity in trade institutions when agents have common values and are perfectly strategic. In the third essay, I look at the extent to which private information restricts the set of implicit agreements to provide public services over time that can be supported via the folk theorem with complete information.