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Environmental, social, and governance (ESG) disclosure has drawn much attention from listed companies, investors, and regulators. In response to the increasing demand of investors and regulators for non‐financial information, listed companies have paid attention to publishing ESG reports consisting of environmental, social, and governance information. Listed companies are increasingly required to provide high‐quality information that is clear and comparable. However, the lack of incentive to listed companies makes it hard to improve the quality of ESG disclosure, and the cost of ESG disclosure leads to the uncontrollable quality of ESG reports and may even manipulation by opportunistic behaviors. In this paper, we illustrate the moral hazard problem in ESG disclosure from the perspective of investors and listed companies, in which the effort level for listed companies to provide high‐quality ESG report cannot be observed by investors. Then we propose a blockchain‐based incentive mechanism for ESG disclosure from a principal‐agent perspective to improve the information quality of ESG disclosure, where investors act as principal and listed companies act as agents. Token in blockchain technology is utilized as the rewards to improve the listed companies' reputation, thus increasing their chance of being promoted to investors for preferential investment opportunities in the blockchain platform. We then design the first‐best (FB) and second‐best (SB) optimal contracts based on classic principal‐agent model to overcome the moral hazard problem. Extensive simulations are conducted to demonstrate the effectiveness and feasibility of the incentive mechanism. [ABSTRACT FROM AUTHOR]

Navigating the Complex Web of Incentives in Asset Management: A Study on Investor, Partner, and Manager Dynamics In a recent study titled "Dynamic Contracting in Asset Management Under the Investor-Partner-Manager Relationship," the researchers delve into the intricate world of incentives in asset management. The focus is on the complex interplay of actions and relationships among three key players: an investor, an investment company partner, and a fund manager. This study uniquely explores the challenges of incentive contracts in an environment where the actions of these individuals are not fully observable to each other. It introduces a hierarchical contracting framework to understand the dynamics under the hidden actions. For instance, the research reveals how the optimal action of the manager is influenced by the cost of the partner's actions and extends the analysis to scenarios involving multiple managers. This work sheds light on the often hidden intricacies of asset management, providing valuable perspectives for the different players' collaborative efforts for optimal outcomes in this industry. We study incentive contracts in asset management business under dynamic actions and relationships between an investor, a partner of an investment company, and a fund manager of the company. Both the manager and the partner exert costly effort to manage the investments. The investor cannot perfectly observe the partner's and manager's actions, and similarly, the partner cannot perfectly observe the manager's actions. Thus, we consider a hierarchical contracting framework under hidden efforts, where the investor contracts with the partner and the partner contracts with the manager. We show how the actions of the participants and the costs of their actions interact. For instance, the optimal effort of the manager falls in the effort cost of the partner. We extend the model to a case with an investor, a partner, and multiple managers. In this case, each manager's effort rises in the effectiveness of the managers' cooperation and falls in the other managers' effort cost. Funding: J. Keppo acknowledges funding support from the Singapore Ministry of Education [Grant R-252-000-A08-112] and from the National Research Foundation (Singapore) and Agency for Science, Technology and Research (Singapore) Industry Alignment Fund–Industry Collaboration Projects [Grant I2001E0059]. N. Touzi acknowledges funding from the Chaire Finance and Sustainable development, Risk Foundation, Louis Bachelier Institute. R. Zuo acknowledges funding support from Guangzhou Municipal Science and Technology Project [2023A03J0163 and 2024A04J4546] and the Guangzhou-HKUST(GZ) joint funding program [2024A03J0630]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/opre.2021.0031. [ABSTRACT FROM AUTHOR]

In the context of "dual carbon" objectives, ESG investment concept has received wide attention. In this paper, based on stochastic systems and stakeholder theory, we analyze the interest requirements of subject stakeholders and investigate the agency conflict and coordination problems in the system. Combining with the contract theory, we construct a continuous-time principal-agent model with ambiguity aversion under ESG rating Knightian uncertainty. By the method of stochastic calculus in multiple priors, we derive the HJB equation for the optimal dynamic contract value function based on ESG rating Knightian uncertainty under incentive compatibility conditions. Then, for different ESG rating levels, through numerical simulation, we discuss the impact of the Knightian uncertainty degree of ESG rating on the optimal contract. The study shows that as the Knightian uncertainty degree of ESG rating increases, companies are more inclined to green development and the maximum expected return of principals decreases. [ABSTRACT FROM AUTHOR]

This article interrogates the development of the European Border and Coast Guard (Frontex) and its implications for the EU's approach to border control coordination. Through the theoretical lens of the principal-agent model, it investigates information asymmetry and friction between stakeholders in the implementation of Frontex's increased competence at the borders. The findings of this article show that the development of Frontex has led to growing incentives for the EU's supranational institutions to steer the agency to pursue their individual objectives, creating new supranational elements in EU border management. [ABSTRACT FROM AUTHOR]

Government contracting officers (purchasing agents) are imperfect actors who may distort the procurement processes due to their individual preferences or biases. As a means of adjudicating this issue, firms may file legal protests against them. While previous studies analysed the effects of monitoring behaviour on procurement outcomes, the underlying mechanisms remain obscure. We overcome this limitation by leveraging interorganisational relationship mechanisms to explore how protests against government agencies affect firm performance. Using data from 2001 to 2019 encompassing bid protests and firm government procurement activities, we conduct panel regressions with firm and time fixed-effects and find that sustained protests improve firm performance. This effect is more pronounced when government agencies' business becomes more dependent on protesting firms. In contrast, non-sustained protests had no effect on firm performance. Our findings highlight different government agencies' reciprocating responses to firm protests and how they influence firm performance. [ABSTRACT FROM AUTHOR]

We consider a government that purchases a public good or a private good for public consumption from a heterogenous group of professionals (such as scientists, doctors, or lawyers) in an environment characterized by an extremely high level of information asymmetry. Specifically, we assume that the government needs information from a self‐regulatory organization (SRO) of agents (such as a research council, a medical board, or a bar association) to draft the contract. We show that the government information disadvantage is minimized when the SRO is dictatorial, that is, when it follows the preferences of the efficient agents. [ABSTRACT FROM AUTHOR]

Improving public services delivery is one of the central tasks of public administration reforms, which substantiates the high importance of analysing approaches to tackling it. The paper discusses avenues for enhancing the quality of public services delivery in the light of the findings of the latest economic research. Methodologically, the study rests on the principles of public administration. The research methods of content analysis and systematization were applied. The results of the study show that today’s approaches to improving public services do not take into account the important aspects of their production and delivery, which are revealed by the principal-agent model and the concept of search, experience and credence goods that has over half a century of history. The article shows that the empirically established negative consequences of new public management applied in the areas, such as health care and education, are direct consequences of this neglect. We formulate a number of proposals concerning the improvement of public services delivery, namely to consider the type of service, to distinguish between the quality of service and the quality of servicing, and to produce credence goods and high-quality services in non-profit organizations while involving workers oriented towards serving the society.

We consider a general framework of optimal contract design under the heterogeneity and short-termism of agents. Our research shows that the optimal contract must weigh the agent's information rent, incentive cost, and benefit to overcome the contract's adverse selection and moral hazards. Agents with higher moral levels were more likely to choose higher effort and lower manipulation. Simultaneously, the principal offers lower incentives and receives more significant payoff. We also extend our model to investigate the benefits of Bayesian learning. Furthermore, we compare the principal's returns in general and learning models and find that the learning contract can bring more profit to the principal.

We study contracting when both principal and agent have to exert noncontractible effort for production to take place. An analyst is uncertain about what actions are available and evaluates a contract by the expected payoffs it guarantees to each party in spite of the surrounding uncertainty. Both parties are risk‐neutral; there is no limited liability. Linear contracts, which leave the agent with a constant share of output in exchange for a fixed fee, are optimal. This result holds both in a preliminary version of the model, where the principal only chooses to supply or not supply an input, and in several variants of a more general version, where the principal may have multiple choices of input. The model thus generates nontrivial linear sharing rules without relying on either limited liability or risk aversion. [ABSTRACT FROM AUTHOR]

This study aims to conduct a comparative analysis regarding Educational Accountability Policies (EAPs) across countries and empirically investigate the factors contributing to the variations in EAP implementation. To achieve these goals, firstly, this study investigated the status of EAP implementation by countries and endeavored to identify the trends regarding the diffusion and variation of EAP. Secondly, this study empirically analyzed the factors associated with variations in EAP implementation across countries. By employing country-level panel data from 30 countries, this study ascertained the status of EAP implementation as a global phenomenon. It examined the factors related to the adoption and intensity of EAP implementation based on the theoretical framework of the principal-agent model. This study has yielded two principal revelations. Firstly, there has been a rapid increase in the number of countries implementing EAP since the 2000s, accompanied by a bolstering of EAP implementation intensity. Nonetheless, there are discernible disparities in the adoption and implementation of EAP by countries. Secondly, this study has revealed that countries characterized by a more advanced economic status or an augmented governmental power tend to exhibit a proclivity for the adoption of EAP. Moreover, countries with a more advanced economic status, an augmented governmental power, or a higher degree of global openness are predisposed to implement EAP with greater intensity. These findings provide significant policy implications for sustainable development in education. [ABSTRACT FROM AUTHOR]

Continuing the centuries-long exchange between economics and biology, our model of reproductive skew is an adaptation of the principal–agent relationship between an employer and an employee. Inspired by the case of purple martins (Progne subis) and lazuli buntings (Passerina amoena), we model a dominant male whose fitness can be advanced not only by coercing a subordinate male but, where coercion is impossible or not cost-effective, also by providing positive fitness incentives for the subordinate that induce him to behave in ways that contribute to the dominant's fitness. We model a situation in which a dominant and subordinate contest over a variable amount of joint total fitness, both the level and division of which result from the strategies adopted by both. Thus there is not some given amount of potential fitness (or 'pie') that is to be divided between the two (or wasted in costly contests). The fitness incentives that in evolutionary equilibrium are conceded to the subordinate by the dominant maximize the dominant's own fitness. The reason is that the larger pie resulting from the subordinate's increased helping more than compensates for the dominant's reduced fitness share. But the conflict over fitness shares nonetheless limits the size of the pie. This article is part of the theme issue 'Evolutionary ecology of inequality'. [ABSTRACT FROM AUTHOR]

We examine a continuous-time reinsurance contracting problem, where the reinsurer (principal) and the insurer (agent) disagree about the resolution of claim process. We illustrate the reinsurance contract design in an application with Bayesian learning. In the principal–agent framework, the reinsurer dynamically decreases the equilibrium reinsurance price instead of keeping it a constant. However, the reinsurance price increases about the belief differences. Both of these two opposite effects on the reinsurance price induce the insurer's demand for reinsurance to first increase and then decrease with respect to decision time as the belief differences increase. Moreover, disagreement results in the relatively pessimistic insurer's risk-taking behavior by raising risk retention as claim volatility increases. Furthermore, we find that when the belief differences are not too large, the reinsurer with belief differences and learning obtains greater satisfaction than the standard one. [ABSTRACT FROM AUTHOR]

Copyright of Athenaeum: Polskie Studia Politologiczne is the property of Faculty of Political Science & Security Studies Nicolaus Copernicus University and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The design of performance-based incentives—commonly used in online labor platforms—can be naturally posed as a moral hazard principal-agent problem. In this setting, a key input to the principal's optimal contracting problem is the agent's production function: the dependence of agent output on effort. Although agent production is classically assumed to be known to the principal, this is unlikely to be the case in practice. Motivated by the design of performance-based incentives, we present a method for estimating a principal-agent model from data on incentive contracts and associated outcomes, with a focus on estimating agent production. The proposed estimator is statistically consistent and can be expressed as a mathematical program. To circumvent computational challenges with solving the estimation problem exactly, we approximate it as an integer program, which we solve through a column generation algorithm that uses hypothesis tests to select variables. We show that our approximation scheme and solution technique both preserve the estimator's consistency and combine to dramatically reduce the computational time required to obtain sound estimates. To demonstrate our method, we conducted an experiment on a crowdwork platform (Amazon Mechanical Turk) by randomly assigning incentive contracts with varying pay rates among a pool of workers completing the same task. We present numerical results illustrating how our estimator combined with experimentation can shed light on the efficacy of performance-based incentives. This paper was accepted by Chung Piaw Teo, optimization. Supplemental Material: The data files and e-companion are available at https://doi.org/10.1287/mnsc.2022.4450. [ABSTRACT FROM AUTHOR]

This paper analyzes how the degree of task-related team diversity influences the team outcome. The focus is on a novel benefit of team diversity that does not depend on complementary skills or mutual learning. We consider a multiagent setting where the employer makes use of career competition to motivate the team. Our analysis reveals incentive effects that do not exist in the well-studied case of teams of size 2. In teams with more than two members, diversity may have a positive effect on the efforts of some members although diversity leads to unbalanced career competition. As a consequence, expected profits are higher under a moderate degree of diversity compared with a situation with completely homogeneous agents. This result shows that the employer prefers a positive degree of diversity for pure incentive reasons. This paper was accepted by Suraj Srinivasan, accounting. Funding: This work was supported by the Deutsche Forschungsgemeinschaft [Grants EXC 2126/1–390838866 and EXC-2047/1–390685813]. [ABSTRACT FROM AUTHOR]

Queueing systems with strategic servers are common in the service industry. The self-interested service rate decision of the strategic server will be detrimental to the queueing system. To improve the service rates, designing incentive contracts for the server from the queueing system owner's perspective is critical. This study investigates the incentive contracts of queueing systems under exogenous and endogenous price scenarios. The unit-price and cost-sharing contracts are introduced to coordinate the queueing system. The effects of pricing mechanisms and contract types on the queueing system are investigated theoretically and experimentally. The results reveal that regardless of whether the price scenario is exogenous or endogenous, the cost-sharing contract is more effective than the unit-price contract in incentivizing the server to make a service effort. The cost-sharing contract with endogenous price can reduce the service price. The cost-sharing contract can boost profits for both the owner and server, albeit with conditions. [ABSTRACT FROM AUTHOR]

Recent major corruption cases in Belgium center around arm's length public institutions. Is there is a specific relationship between governance mechanisms and corruption in such institutions that weakens their accountability? To answer this question, the principal-agent framework was applied to two Belgian case studies. This study supports the hypothesis that New Public Management reforms, such as decentralization and diminishing state intervention have rendered the character of corruption more sophisticated. The study also shows how failures in governance mechanisms led to corruption, but more importantly how corruption, both by the agent and by the principal, contributed to that failure in the first place. Consociationalism and partitocracy, characteristic of the Belgian political system, are important contextual elements that help explain this relationship between governance and corruption, and suggest that the observed corruption is probably not exceptional. To better prevent corruption in arm's length public institutions, the focus should be on strengthening the independence and expertise of members in governance structures, ensuring the independence of the audit and regulatory functions, and investing the limited means available to fight corruption in the principal-agent relationship rather than in the agent-client relationship. [ABSTRACT FROM AUTHOR]

As demand response programs have been deployed worldwide, a new business model, called the demand response aggregator, has recently emerged in some countries and regions. In this study, we identify the supply chain interactions of the business model in the demand response market and investigate the optimal contract design for the aggregator. The main challenge in the contract design problem is caused by asymmetric information between the aggregator and customers. Basically, the customers have two pieces of private information: their demand response potential and disutility level. We first apply the principal-agent model paradigm to formulate a reference model for this problem. In addition, using our model, we analytically and numerically examine the effects of the two pieces of private information on contract design and derive some strategies for the aggregator. Our analytical and numerical analyses find that the private information induces the aggregator to pay additional incentives for customers. However, when the customers accurately know their private information, the aggregator can minimize the profit loss from asymmetric information by suggesting a menu of contracts, which induces the customers to choose their best options. The aggregator can induce customers to reveal their own types of demand response potentials without paying any informational rent by using the separating contract structure since the customers choose the best contract among the menu in terms of their own profit. This study could advance a new business model, naturally promoting demand response programs. [ABSTRACT FROM AUTHOR]

We study how an organization should dynamically screen an agent of uncertain loyalty whom it suspects of committing damaging acts of undermining. The organization controls the stakes of the relationship, while the agent strategically times undermining, which can occur repeatedly and is detected only stochastically. The optimal commitment stakes policy exhibits both discreteness and gradualism, with distinct "untrusted" and "trusted" phases featuring gradually rising stakes during the untrusted phase and a discrete gap in stakes between phases. This policy is also the equilibrium outcome when the organization cannot commit, and the agent's equilibrium undermining policy exhibits variable, non-monotonic intensity. [ABSTRACT FROM AUTHOR]

The authors study the use of sales agents for network mobilization in a two-sided market platform that connects buyers and sellers, and they examine how the presence of direct and indirect network effects influences the design of the sales compensation plan. They employ a principal–agent model in which the firm tasks sales agents to mobilize the side of the platform that it monetizes (i.e., sellers). Specifically, the presence of network effects alters the agency relationship between the firm and the sales agent, requiring the platform firm to alter the compensation design, and the nature of the alteration depends on whether the network effects are direct or indirect and positive or negative. The authors first show how the agent's compensation plan should account for different types of network effects. They then establish that when the platform firm compensates the agent solely on the basis of network mobilization on the side cultivated by the agent (sellers), as intuition would suggest, it will not fully capitalize on the advantage of positive network effects; that is, profit can be lower under stronger network effects. To overcome this limitation, the platform should link the agent's pay to a second metric, specifically, network mobilization on the buyer side, even though the agent is not assigned to that side. This design induces a positive relation between the strength of network effects and profit. This research underlines the complexity and richness of network effects and provides managers with new insights regarding the design of sales agents' compensation plans for platforms. [ABSTRACT FROM AUTHOR]

The Medicare Shared Savings Program (MSSP) was created under the Patient Protection and Affordable Care Act to control escalating Medicare spending by incentivizing providers to deliver healthcare more efficiently. Medicare providers that enroll in the MSSP earn bonus payments for reducing spending to below a risk-adjusted financial benchmark that depends on the provider's historical spending. To generate savings, a provider must invest to improve efficiency, which is a cost that is absorbed entirely by the provider under the current contract. This has proven to be challenging for the MSSP, with amajority of participating providers unable to generate savingsowing to the associated costs. In this paper, we propose a predictive analytics approach to redesigning the MSSP contract with the goal of better aligning incentives and improving financial outcomes from the MSSP. We formulate the MSSP as a principal-agent model and propose an alternate contract that includes a performance-based subsidy to partially reimburse the provider's investment. We prove the existence of a subsidy-based contract that dominates the current MSSP contract by producing a strictly higher expected payoff for both Medicare and the provider. We then propose an estimator based on inverse optimization for estimating the parameters of ourmodel. Weuse a data set containing the financial performance of providers enrolled in the MSSP,which together accounts for 7 million beneficiaries and more than $70 billion inMedicare spending.We estimate that introducing performance-based subsidies to the MSSP can boost Medicare savings by up to 40% without compromising provider participation in the MSSP. We also find that the subsidy-based contract performs well in comparison with a fully flexible nonparametric contract.

• We examine the joint resilience investment on the cross-country transport infrastructure. • The first-best outcomes can be achieved if the resilience investment is verifiable. • The non-verifiability leads to a downward distortion on investment under higher disruption. • The first-best outcomes can still be achieved under non-verifiability if the disruption is low. Unlike the domestic transport infrastructure, the cross-country ones are subject to more diverse and unconventional disruption risks due to the unstable geopolitical conditions, terrorist attacks, and complex landscape and extreme weather events, thus calling for resilience-related investments from different countries. However, such resilience investment made by one country to deal with such unconventional disruption risk is very hard to be verified by other countries (i.e., non-verifiability). This paper establishes an integrated economic model to analytically examine countries' joint resilience investments on the cross-country transport infrastructure in presence of non-verifiability. Specifically, there is one "investing country" who constructed the infrastructure which is also used by a "host country". Our analytical results suggest that the first-best investment and market outcomes for the global welfare maximization can be achieved if the resilience investment is verifiable. The non-verifiability is, however, found to cause a downward distortion in the resilience investment and an upward distortion in transport price when the probability of the disruption is higher such that the resilience investment only partially covers the potential loss. On the contrary, when the probability of disruption is low so that the resilience investment can lead to the full loss coverage, the first-best outcomes can still be achieved without any distortion. Our analytical model is also extended to account for the intermodal competition. Although our main conclusions still qualitatively hold, the intermodal competition is found to have uncertain effects on the market outcomes, depending on the interaction between the resilience investment cost and the degree of the intermodal competition. [ABSTRACT FROM AUTHOR]

This paper first studies the optimal reinsurance problems for two competitive insurers and then studies the optimal reinsurance premium pricing problem for their common reinsurer by using the dynamic programming technique. The two insurers are subject to common insurance systematic risk. Each purchases proportional or excess-of-loss reinsurance for risk control. They aim to maximize the expected utilities of their relative terminal wealth. With the insurers' optimal reinsurance strategies, the reinsurer decides the reinsurance premiums for each insurer, also aiming to maximize the expected utility of her terminal wealth. Thus, the optimal reinsurance pricing problem is formulated as a Stackelberg game between two competitive insurers and a reinsurer, where the reinsurer is the leader, and the insurers are followers. Besides, all three players take model ambiguity into account. We characterize the optimal strategies for the insurers and the reinsurer and provide some numerical examples to show the impact of competition and model ambiguity on the pricing of reinsurance contracts. [ABSTRACT FROM AUTHOR]

This paper examines political accountability in Africa since the fight against corruption began to gain traction in the continent during the 1990s. The standpoint adopted here is that well-functioning political accountability depends on three key factors: the prominence of civil society in governance; the existence of sanctions for the abuse of public office; and lastly, media impartiality. Given these indicators, a multi-item index measuring and ranking political accountability in 54 African countries was constructed using data from the 2020 Ibrahim Index of African Governance. I found that on the index, Eritrea ranked lowest and Mauritius highest, while West Africa had more high scorers, Southern Africa had mixed results and Middle Africa and North Africa were worse off. Overall, from the index, political accountability in Africa is brittle. While this fragility is not tantamount to a lack of progress in the fight against corruption in the continent, the article recommends that regional and continental stakeholders should design and implement carefully tailored anti-graft programmes and that national governments should strengthen the administrative capabilities of anti-graft agencies to ensure greater accountability in the implementation of anti-graft projects. [ABSTRACT FROM AUTHOR]

One key question in the study of the European Union has always been the extent of Commission discretion. We take the discretion index, typically used by principal–agent scholars to measure the Commission's designed discretion, to measure its actual discretion. Commission designed discretion can today be computationally generated with sufficient accuracy across all secondary acts. The study of designed discretion thus reaches considerable maturity. Therefore, we argue that scholars should prioritize studying Commission actual discretion. We present a systematic and transparent investigative technique based on the discretion index, which we use as a roadmap to guide our empirical investigation. The index facilitates the accumulation of knowledge across policy areas and time by providing exact values for Commission discretion. We illustrate our approach with the Development Cooperation Instrument. [ABSTRACT FROM AUTHOR]

This paper investigates the effects of regulatory interventions on contracting relationships within firms by examining the impacts of the Sarbanes–Oxley (SOX) Act on CEO compensation. Using panel data of the S&P 1500 firms, it quantifies welfare gains from a principal–agent model with hidden information and hidden actions. It finds that SOX: (1) reduced the conflict of interest between shareholders and their CEOs, mainly by reducing shareholder loss from CEOs deviating from their goal of expected value maximization; (2) increased the cost of agency, or the risk premium CEOs are paid to align their interests with those of shareholders; (3) increased administrative costs in the primary sector (which includes utilities and energy) but the effect in the other two broadly defined sectors, services and consumer goods, was more nuanced; and (4) had no effect on the attitude of CEOs toward risk. [ABSTRACT FROM AUTHOR]

Queueing systems with strategic servers are common in the service industry. The self-interested service rate decision of the strategic server will be detrimental to the queueing system. To improve the service rates, designing incentive contracts for the server from the queueing system owner’s perspective is critical. This study investigates the incentive contracts of queueing systems under exogenous and endogenous price scenarios. The unit-price and cost-sharing contracts are introduced to coordinate the queueing system. The effects of pricing mechanisms and contract types on the queueing system are investigated theoretically and experimentally. The results reveal that regardless of whether the price scenario is exogenous or endogenous, the cost-sharing contract is more effective than the unit-price contract in incentivizing the server to make a service effort. The cost-sharing contract with endogenous price can reduce the service price. The cost-sharing contract can boost profits for both the owner and server, albeit with conditions.

Designing Incentives to Promote Treatment Adherence Premature cessation of antibiotic therapy is common and can severely compromise health outcomes, potentially leading to worsening health, disease transmission, and antibiotic resistance. In "Design of Incentive Programs for Optimal Medication Adherence in the Presence of Observable Consumption," Sze-chuan Suen, Diana Negoescu, and Joel Goh investigate the problem of designing a schedule of incentive payments to induce socially optimal treatment adherence levels in settings in which treatment adherence can be observed but patient preferences for treatment adherence are heterogeneous and unobservable to a health provider. The novel elements of this problem stem from its institutional features: there is a single incentive schedule applied to all patients, incentive payments must be increasing in patients' adherence, and patients cannot be a priori prohibited from any given levels of adherence. The authors develop models to design optimal incentives incorporating these features and conduct a numerical study of the tuberculosis epidemic in India. Premature cessation of antibiotic therapy (nonadherence) is common in long treatment regimens and can severely compromise health outcomes. In this work, we investigate the problem of designing a schedule of incentive payments to induce socially optimal treatment adherence levels in a setting in which treatment adherence can be observed (e.g., through directly observed therapy for tuberculosis), but patient preferences for treatment adherence are heterogeneous and unobservable to a health provider. The novel elements of this problem stem from its institutional features: there is a single incentive schedule applied to all patients, incentive payments must be increasing in patients' adherence, and patients cannot be a priori prohibited from any given levels of adherence. We develop models to design optimal incentives incorporating these features, and they are also applicable in other problem contexts that share the same features. We also conduct a numerical study using representative data in the context of the tuberculosis epidemic in India. Our study shows that our optimally designed incentive schedules are generally cost-effective compared with a linear incentive benchmark. [ABSTRACT FROM AUTHOR]

The present inquiry addresses the nexus between the development of electronic government and corruption in the provision of public sector services in developing and transition economies. The study analyzes the potential contribution of electronic government in combating petty corruption within the framework of two superimposed principal-agent model and show that electronic government could potentially limit bureaucratic corruption. To address the research question empirically, the study applies random tobit and linear random effects panel estimators to a dataset made of 121 countries, which covers the time period between 2008 and 2018. Estimations reveal that the adoption of electronic government in the delivery of public sector services has been the central factor that contributed to the reduction of petty corruption in developing and transition economies. The level of per capita income, political rights, civil liberties and share of natural resources in gross exports also correspond with less bribery in the public sector service delivery. Furthermore, the study finds that a lower level of socio-economic development corresponds with a greater level of petty corruption. Hence, e-government presents one of the utmost opportunities for socio-economic development and offers solutions for the improvement of the efficiency and effectiveness of public administration. [ABSTRACT FROM AUTHOR]

Environmental incentives are characterized by two distinct features: (1) a benefit-cost trade-off; and (2) private information about the trade-off. This suggests a degree of freedom of where to attach the private information, either to the benefit or the costs, as long as these choices imply the same behavior absent incentives ('observation equivalent'). However, we show that different observation equivalent specifications can lead to different incentives. This is demonstrated for two cases: rainforest protection and contributions to a public good. Therefore, the choice of a private information parameter must be justified against observation equivalent alternatives. [ABSTRACT FROM AUTHOR]

How does making electoral systems more candidate-centered affect party unity? Using a principal-agent perspective, this study makes three contributions to the literature on this topic. Conceptually, it suggests thinking about the incentives due to personalization as arising from a shift in electoral impact from party selectors to voters. Theoretically, it incorporates this notion into a spatial model of parliamentary voting that also considers principals' monitoring capacities. From the resulting framework follows a rich set of observable implications, notably that candidate-centered electoral systems facilitate rather than undermine collective action within parliamentary parties under certain conditions. Empirically, this study then analyzes the 2010 reform of Sweden's flexible-list proportional representation system, which changed the preference vote threshold. As expected, I find that when extreme (district-based) selectors disagree with the moderate bills supported by the party group leadership, personalized rules incentivize politicians to support these policies and vote in unison. [ABSTRACT FROM AUTHOR]

Objective: We want to better understand what incentives firms to pursue innovations. For this purpose, we set up a new intertemporal principal-agent model. We then proceed to empirically assess the determinants of innovation activities unfolded by German firms between 2006 and 2019 and to also look at the causal factors -- related to innovation activities -- for the occurrence of patent registration in Germany. Research Design & Methods: In the theoretical part, we make use of intertemporal optimization tools based on the principal-agent model (PAM). In the empirical part, we apply the so-called DuPont decomposition and non-linear regression techniques. Findings: It seems that investment activities in conjunction with product innovations are the major determinants of innovation intensity. The latter (and other innovation related variables) in turn, is (are) responsible for the dynamics of patent registration in Germany. Implications & Recommendations: Our results highlight the importance of smart reward systems in R&D departments in order to incentivize innovative activities. Our findings also point at the significance of a patent regulation friendly to the innovator. Contribution & Value Added: Our findings deliver a new foundation of innovation activities based on an intertemporal principal agent approach which is confirmed by the empirical facts in the case of Germany. [ABSTRACT FROM AUTHOR]

The fairness preference in the principal-agent relationship is a vital factor that can even determine the success or failure of one program. Under normal circumstances, the capital invested by VC is often several times that of EN, which is one of the reasons for the profit gap between EN and VC. Therefore, when establishing a principal-agent model with fairness preferences, it is necessary to project the utility of VC to the level of EN and compare it with the utility of venture entrepreneurs, which will better reflect the profit gap between the two. On the basis of previous studies, this paper considers the amount of contribution of the participants, builds four principal-agent models to find the optimal distribution of income between the Venture Entrepreneur (EN) and the Venture Capital (VC) in a venture capital investment program, two without fairness preference and others with fairness preference. After the simulation we confirm that the fairness preference coefficient exerts a great impact on the distribution of income in both situations where information is symmetric and asymmetric, and a strong fairness preference will lead to a greater net profit gap between the EN and the VC. Thus, the EN should carefully choose the level of his efforts to realize the maximum return for him. In the case of information asymmetry, EN's optimal effort level decreases as the fairness preference coefficient increases.This will affect project revenue. And then affect the VC income.

Objective: We want to better understand what incentives firms to pursue innovations. For this purpose, we set up a new intertemporal principal-agent model. We then proceed to empirically assess the determinants of innovation activities unfolded by German firms between 2006 and 2019 and to also look at the causal factors – related to innovation activities – for the occurrence of patent registration in Germany. Research Design & Methods: In the theoretical part, we make use of intertemporal optimization tools based on the principal-agent model (PAM). In the empirical part, we apply the so-called DuPont decomposition and non-linear regression techniques. Findings: It seems that investment activities in conjunction with product innovations are the major determinants of innovation intensity. The latter (and other innovation related variables) in turn, is (are) responsible for the dynamics of patent registration in Germany. Implications & Recommendations: Our results highlight the importance of smart reward systems in R&D departments in order to incentivize innovative activities. Our findings also point at the significance of a patent regulation friendly to the innovator. Contribution & Value Added: Our findings deliver a new foundation of innovation activities based on an intertemporal principal agent approach which is confirmed by the empirical facts in the case of Germany.

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In many international agreements, the European Union sets up joint bodies such as 'association councils' or 'joint committees'. These institutions bring together European Union and third-country officials for agreement implementation. To date, we know surprisingly little about how much discretion the European Commission enjoys in them. Drawing on a principal–agent framework, we hypothesise that the complexity of agreements, the voting rule, conflict within the Council, and agency losses can explain Commission discretion in these institutions. Drawing on an original dataset covering nearly 300 such joint bodies set up by the European Union since 1992, we find robust empirical support for all expectations except for the agency loss thesis. Our findings suggest that the European Commission is the primary actor in the implementation of many of the European Union's international agreements, allowing it to influence EU external relations beyond what is currently acknowledged in the literature. [ABSTRACT FROM AUTHOR]

The history of oil contracts in the last century indicates that oil contracts are a form of conflict between the interests of foreign oil companies and national interests of reservoir-owning governments. In this context, an important question arises for reservoir-owning governments as to which existing conventional upstream contracts should be chosen to maximize benefits. Representation theory has been used to answer this research question. In the designed model, each party's interest function in each of the upstream contracts is identified and modeled. Also, the rationality and motivation conditions in this model have been analyzed as participation constraints. The results of the proposed model using the genetic algorithm method show that, given field coordinates, the production-sharing contract has the lowest representation cost compared to the other two contracts of concession and service purchase. And as the selected model, production-sharing contracts can make the most profit for reservoir-owning governments.

Authorizing an agent by letting him choose the project he has to carry out will be problematic if the agent receives exogenously given private benefits from specific projects. This paper shows that delegating authority is problematic even without such private benefits. By picking an overly difficult project that does not maximize profits, the agent can force the principal into renegotiation of his incentive contract. This manipulation of incentive pay might deter the principal from efficient delegation. As a policy implication, if the cost of overruling the agent is too high, the principal should rely on a consequent kind of delegation that avoids interim monitoring of the agent and solely assesses realized output. [ABSTRACT FROM AUTHOR]

The escalation of commitment process involves a decision-maker continuing commitment to an investment after receiving negative information. This study develops a principal-agent model to explore how escalation decisions are linked with departures of CEOs from the position. With asymmetric information, a CEO has an incentive to conceal prior decision errors by escalating commitment to failing investments and leaving the firm before the outcome of investment decisions is disclosed publicly. Results of empirical analysis based on a sample of over 3,000 US firms are consistent with the theory and demonstrate that firms' reporting of low financial performance relative to their industry as well as initiation of new discontinued operations are preceded, and not followed, by unplanned CEO departures. [ABSTRACT FROM AUTHOR]