Final goods producers, who may be intrinsically honest (a behavioral type) or opportunistic (strategic), play a repeated game of imperfect information with suppliers of an input of variable (and non-verifiable) quality. Returns to cheating are increasing in the proportion of intrinsically honest...

We study the role of information exchange, leadership and coordination in team or partnership structures. For this purpose, we view individuals jointly engaging in productive processes -- a 'team' -- as endowed with individual and privately held information on the joint production process. Once...

We analyze the complementarity between legal incentives (the threat of being held liable for damages) and normative incentives (the fear of social disapproval or stigma) in situations where instances of misbehavior are not perfectly observable. There may be multiple equilibria within a given...

In a simple model of currency crises caused by creditor coordination failure, we show that bailouts that reduce ex post inefficiency will sometimes create ex ante moral hazard but will sometimes enhance the incentives for governments to take preventative actions. This model helps us understand a...

We analyze the efficiency properties of the negligence rule with liability insurance, when the tort-feasor's behavior is imperfectly observable both by the insurer and the court. Efficiency is shown to depend on the extent to which the evidence is informative, on the evidentiary standard for...

We study optimal contracting in team settings, featuring stylized aspects of production environments with complex tasks. Agents have many opportunities to shirk, task-level monitoring is needed to provide useful incentives, and because it is difficult to write individual performance into formal...

This paper assesses the merits of countercyclical bank balance sheet regulation for the stabilization of financial and economic cycles and examines its interaction with monetary policy. The framework used is a dynamic stochastic general equilibrium model with banks and bank capital, in which...