A Game-Theoretic Model of Tenure

  • Kalyan ChatterjeeEmail author
  • Robert C. Marshall
Part of the International Series in Operations Research & Management Science book series (ISOR, volume 194)


Contingent contracts for university faculty, based on output or investment, are not possible since neither output nor investment are verifiable. Further, the accumulation of discipline-specific human capital by academics is often detrimental to their opportunities outside their occupations. We have shown in this paper that the confluence of these effects results in a lifetime employment contract. Universities prefer it because it encourages increased levels of investment. Faculty members prefer it since it prevents employers from taking advantage of the erosion of their outside opportunities as they strive for results in their discipline.


Faculty Member Academic Freedom Employment Contract Subgame Perfect Equilibrium Spot Market 
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The authors are indebted to Bill Samuelson for detailed editing that greatly improved the paper. The authors thank the Human Capital Foundation (, and especially Andrey Vavilov, for financial support. We thank Jordan Kurland of the AAUP as well as William Kovacic for helpful discussions. Professor Chatterjee thanks the American Philosophical Society for a sabbatical fellowship that provided financial support for this work and Churchill College, Cambridge for hosting him as an Overseas Fellow during the sabbatical period. We also thank the audiences at the various seminars where this paper has been presented for useful comments.


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Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  1. 1.Department of EconomicsPennsylvania State UniversityPAUSA

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