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We present three distinct works on the subject of incentive design. The first focuses on a fundamental aspect of all principal-agent models, the participation constraint. We endogenise the constraint, allowing the agent to influence his outside option, albeit at some detriment to the project he is contracted to work upon. We compare the optimal contract to the literature on the supposed trade-off between risk and incentives. We find support for the Prendergast (2002) observation of a positive relationship between the two variables and ofer an explanation through the use of said influence activities. The second contribution introduces another principal-agent framework for models with both adverse selection and moral hazard, with the novel inclusion of limited liability. Described in a target-setting environment, the findings are related to and support the use of tenure contracts in academia. This is justified by the fact that pooling equilibria maximise the value to the principal and fully separating equilibria are implemented with non-monotonic wage structures. Finally, in opposition to conventional literature, those of low type make rent gains over and above their reservation utility, while the high types break even. The final chapter studies organisational design and allocation of control. We offer conditions whereby firms would wish to integrate, or profit-share, with another, given varying degrees of control allocation. We show that integration comes at a lower cost for the decision-making firm when control is contractible as opposed to transferable. Also we show that the level of incompatibility between firms, unrelated to financial gain, can affect the integration decision.

Sustainable production and consumption have become more important internationally, which has led to the transformation of market structures and competitive situations into the direction of servitisation. This means that manufacturing companies are forced to compete through the supply of services as opposed to products. Particularly the suppliers of long-life products such as submarines and airplanes no longer simply sell these products but provide their capability or availability. Companies such as Rolls-Royce Engines achieve 60% of their revenue through selling a service rather than the engine itself. For a manufacturing company, the shift towards being a service provider means that they usually have to bid for service contracts, sometimes competitively. In the context of competitive bidding, the decision makers face various uncertainties that influence their decision. Ignoring these uncertainties or their influences can result in problems such as the generation of too little profit or even a loss or the exposure to financial risks. Raising the decision maker’s awareness of the uncertainties in the form of e.g. a decision matrix, expressing the trade-off between the probability of winning the contract and the probability of making a profit, aims at integrating these factors in the decision process. The outcome is to enable the bidding company to make a more informed decision. This was the focus of the research presented in this thesis. The aim of this research was to support the pricing decision by defining a process for modelling the influencing uncertainties and including them in a decision matrix depicting the trade-off between the probability of winning the contract and the probability of making a profit. Three empirical studies are described and the associated decision process and influencing uncertainties are discussed. Based on these studies, a conceptual framework was defined which depicts the influencing factors on a pricing decision at the bidding stage and the uncertainties within these. The framework was validated with a case study in contract bidding where the uncertainties were modelled and included in a decision matrix depicting the probability of winning the contract and the probability of making a profit. The main contributions of this research are the identification of the uncertainties influencing a pricing decision, the depiction of these in a conceptual framework, a method for ascertaining how to model these uncertainties and assessing the use of such an approach via an industrial case study.