This Paper shows that the inability of regulators to commit to long-term contracts is irrelevant when there is some competition between regulated firms and when firms’ private information is correlated. This sharply contrasts with the dynamic of regulation without such competition. The Paper...

This paper presents a simple ratchet model. The ratchet effect, and the inability of the government to precommit credibly to given incentive schemes, are related to the fact that the government has monopsony power over managers, as is the case under market socialism where means of production are...

We extend the model of Schultz (1996) to a dynamic setting with no policy commitment. Two parties that compete for election must choose the level of provision of a public good as well as the tax payment needed to finance it. The cost of producing the good may be high or low and this information...

Delegation to independent bodies whose preference can be different from those of the government has been shown to have beneficial commitment benefits in areas as widely diverse as monetary policy and trade. This paper addresses the case for delegation in the context of a cost-reimbursement...

We study dynamic moral hazard where principal and agent are symmetrically uncertain about job difficulty. Since effort is unobserved, shirking leads the principal to believe that the job is hard, increasing the agent's continuation value. So deterring shirking requires steeper incentives, which...

In many long-term relationships, parties may be reluctant to reveal their private information in order to benefit from their informational advantage in the future. We point out that the strategic use of debt by an uninformed party induces another party to reveal private information. Our...