Takeshi Murooka

Team Incentives and Reference-Dependent Preferences ∗

This paper examines a multi-agent moral hazard model in which agents have expectation-based reference-dependent preferences `a la K˝oszegi and Rabin (2006, 2007). The agents’ utilities depend not only on their realized outcomes but also on the comparisons of their realized outcomes with their reference outcomes. Due to loss aversion, the agents have a first-order aversion to wage uncertainty. Thus, reducing their expected losses by partially compensating for their failure may be beneficial for the principal. When the agent is loss averse and the project is hard to achieve, the optimal contract is based on team incentives which exhibit either joint performance evaluation or relative performance evaluation. Our results provide a new insight: team incentives serve as a loss-sharing device among agents. This model can explain the empirical puzzle of why firms often pay a bonus to low-performance employees as well as high-performance employees.

Self‐Control Problems and Consumption‐Saving Decisions: Theory and Empirical Evidence

Time‐discounting is a fundamental preference which affects wealth accumulation. If people are impatient, they may spend their earnings instantaneously, and do not save enough for the future. People are often time‐inconsistent, i.e., they often put exceptionally high value on immediate consumption compared to any time in the future. Whether they are aware or not, these individuals are susceptible to self‐control problems. In this paper, we review theoretical and empirical research on time‐inconsistency and self‐control problems, particularly on consumption and saving, and discuss their policy implications.

A Note on Credible Spatial Preemption in an Entry-Exit Game

I investigate how an incumbent firm deters entry by crowding the market, even when the incumbent can withdraw its stores in response to entry. In a two-location model, Judd (1985) shows such spatial entry deterrence is not credible. In contrast, I demonstrate spatial preemption can be credibly employed in a circular-city model if the incumbent can build its stores on sufficiently many locations and transportation costs are linear.

Randomized strategy equilibrium in the action commitment game with costs of leading

We investigate a two-player action commitment game where one simultaneous-move and two sequential-move pure strategy equilibria exist when the cost of leading is zero, while the simultaneous-move outcome is not an equilibrium when the leading cost is small positive. We show that this discontinuity disappears if we consider randomized strategy equilibria. We investigate a price competition model and show that randomized strategy equilibria exist and any of them converges to the Bertrand equilibrium when the leading cost converges to zero.