Working Papers

Communities, Co-ops, and Clubs: Social Capital and Incentives in Large Collective Organizations (with Aaron Kolb and Curtis Taylor, Forthcoming at AEJ: Microeconomics)

Abstract: We study a continuous-time organization design problem. Each member’s output is an imperfect signal of his underlying effort, and each member’s utility from remaining in the organization is endogenous to other members’ efforts. Monetary transfers are assumed infeasible. Incentives can be provided only through two channels: expulsion following poor performance (the stick) and “vacation” or respite following good performance (the carrot). We derive the steady state distribution of members’ continuation utilities for general parameter values and then optimize these values according to organizational objectives. An optimally designed organization can be implemented by associating continuation utilities with a performance-tracking reputation system. [Link]

Works in Progress

Income-Share Agreements on the Job Market: Debt Versus Equity (Job Market Paper)

Abstract: Income-share agreements (ISAs) recently have been gaining traction as a way for students to finance college education, marketed as a way for students to reduce the down-side risk of winding up in a low-paying job with high student debt. Because ISA payments are a fraction of the on-the-job wage, incentives for both applicant and provider are different from a traditional debt-financed job applicant on the job market. I develop a labor-search model to show how financing affects job-market outcomes such as wages, search duration, and overall utility, set within an equilibrium framework where the terms and methods of financing are endogenous. I show that ISAs can constitute an important part of the college-financing decision for financially-disadvantaged potential college students, and can act well as a substitute for traditional debt-markets when the cost of college is neither very low nor very high. [Link]