The current art in optimal combinatorial auctions is limited to handling the case of single units of multiple items, with each bidder bidding on exactly one bundle (single minded bidders). This paper extends the current art by proposing an optimal auction for procuring multiple units of multiple items when the bidders are single minded. The auction minimizes the cost of procurement while satisf...

We examine information aggregation regarding industry capital productivity from privately informed managers in a dynamic model with optimal incentive contracts. Information cascades always occur if managers enjoy limited liability: when beliefs regarding productivity become endogenously extreme (optimistic or pessimistic), learning stops. There is no learning if initial beliefs are extreme, or ...

challenges to physicians – those with specific business interests as well as those whose sole focus is patient care. Understanding the law and knowing which, if any, of the many Stark exceptions apply to your arrangement is essential. Part I of this series explained the purpose of the Stark statute, how it differs from the anti-kickback statute and how you can determine whether it applies to ...

We present a model highlighting one advantage of negotiation over posted prices from the seller’s perspective. In the process, we develop a general methodology for studying mechanism design with weaker incentive constraints. To do so, we introduce the notion of an incentive graph, which encodes the relevant constraints. This construction is relevant when agents possess hard evidence, when they ...

Performance measurement is an essential part of the design of any incentive system. The strength and value of incentives in organizations are strongly affected by the performance measures available. Yet, the characteristics of valuable performance measures have not been well explored in the agency literature. In this paper, I use a multi-task model to develop a two-parameter characterization of...

Recent technology advances give firms more flexibility to utilize employee performance data at a reduced and yet significant cost. This paper develops a theory of optimal incentive contracting where the monitoring technology that governs the above described procedure is part of the designer’s strategic planning. In otherwise standard principal-agent models with moral hazard, we assume that the ...

Optimal Incentive Contracts under Inequity Aversion We analyze the Moral Hazard problem, assuming that agents are inequity averse. Our results differ from conventional contract theory and are more in line with empirical findings than standard results. We find: First, inequity aversion alters the structure of optimal contracts. Second, there is a strong tendency towards linear sharing rules. Thi...

Incentive contracts often include important subjective components that mitigate incentive distortions caused by imperfect objective measures. This paper explores the combined use of subjective and objective performance measures in (respectively) implicit and explicit incentive contracts. We show that the presence of sufficiently effective explicit contracts can render all implicit contracts inf...

We consider a dynamic setting where both adverse selection and moral hazard concerns are present. We analyze how the power of the optimal incentive scheme varies over time according to the agent's performance history. In many circumstances, the power of later incentive schemes optimally declines as earlier performance improves. The imposition of poor performance incentives following good perfor...