Patrick W. Schmitz
Economics Letters, Vol. 224, 2023, 111012.
Abstract. A principal wants an agent to exert unobservable research effort. Ruling out negative payments implies that (i) the principal cannot punish bad outcomes and (ii) she cannot extract rents. We disentangle these two effects by allowing the principal to place verifiable teaching duties on the agent. In the first scenario, the principal can punish the agent with completely unproductive teaching duties conditional on bad research outcomes. In the second scenario, the agent is forced to teach regardless of research outcomes, though his teaching disutility is larger than the principal`s benefit. Each of the two scenarios may involve higher research efforts.
The working paper version is available for download (CEPR Discussion Paper 17885).
The paper is available for download.