Owners of property and assets frequently delegate decisions about operating and maintaining their property to managers who are better informed about local market conditions. We analyze how owners optimally contract with managers who vary in their expertise at prescribing service. We show that the most expert managers offer the greatest variation in operating recommendations. Owners benefit from dealing with experts provided they contract sequentially, whereby terms are negotiated gradually as the manager acquires information.
Few studies have addressed the effects of teacher education generally, no less the specific program elements necessary to prepare competent and caring teachers. As a result, to address teacher shortages in science, mathematics, and special education, alternatives to traditional preparation have been proposed, and their development has proceeded apace. In the absence of guidance from research, alternative program designs have dramatically varied, even on such fundamental considerations as program length and the amount of preparation trainees require before becoming teachers of record. However, research on teacher education is only one potential source of guidance for program design. In this article, the authors use economic research and theory to identify principles of effective design. Considerations include program location, candidate selection, program cost, financial support, program requirements, practice teaching, and mentorship. They use these principles to compare and contrast fast-track programs and programs for midcareer changers.
The appeals process is employed in many organizations, including administrative agencies, regulatory authorities, sports organizations, and private companies. This paper examines the dual role of the appeals process in correcting errors and inducing compliance in principal-agent relationships in the presence of imperfect performance evaluation. Some surprising results emerge. For example, appeals may be denied even if the appeals process is quite accurate and costless. An increased accuracy of initial observation may reduce welfare. Furthermore, welfare can increase as the cost of the appeals process increases.1
We examine the optimal regulatory policy for a risk-averse …rm when the …rm is imperfectly informed about its e¢ ciency parameter for a project at the time of contracting. The …rm's risk aversion shifts the optimal regulatory policy from a …xed-price contract to a cost-plus contract. The optimal regulatory policy entails undere¤ort by an ine¢ cient …rm as in Lafont and Tirole (1986) and the e¤ort distortion increases as the …rm becomes more risk-averse. Further, the regulator bene…ts from sequential contracting with the …rm where the …rm chooses contract terms gradually as it acquires information, albeit the bene…t diminishes as the …rm becomes more risk-averse.
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