We study the standard economic model of unilateral accidents, in its simplest form, assuming that the injurers have limited assets.We identify a second-best optimal rule that selects as due care the minimum of first-best care, and a level of care that takes into account the wealth of the...

The paper deals with a bilateral accident situation in which victims have heterogeneous costs of care. With perfect information,efficient care by the injurer raises with the victim's cost. When the injurer cannot observe at all the victim's type, and this fact can be verified by Courts,...

Large law firms seem to prefer hourly fees over contingent fees. This paper provides a moral hazard explanation for this pattern of behavior. Contingent legal fees align the interests of the attorney with those of the client, but not necessarily with those of the partnership. We show that the...

We consider a procurement problem in which the procurement agent is supposed to allocate the realization of a project according to a competitive mechanism that values bids in terms of the proposed price and quality. Potential bidders have private information about their production costs. Since...

We analyze risk sharing and fiscal spending in a two-region model with complete markets. Fiscal policy determines tax rates for each state of nature. When fiscal policy is decentralized, it can be used to affect prices of securities. To manipulate prices to their beneffit, regions choose...

We study relative performance evaluation in executive compensation when executives have private information about their ability. We assume that the joint distribution of an individual firm’s profit and market movements depends on the ability of the executive that runs the firm. In the...

We study the dynamics of corruption relying on two fundamental observations: (a) Given agents detected as corrupt are typically fired and replaced, the historical levels of corruption have an impact on current corruption through the distribution of corruption costs of old agents; (b)...

We study bureaucratic corruption in a model in which a constituency sets required levels for a given set of activities. Each activity is carried out by an external provider, and its realization is supervised by a bureaucrat. While bureaucrats are supposed to act on behalf of the constituency,...

We analyze the impact of different types of international conventions that require signatory countries to penalize domestic firms that are found to have bribed foreign public officials. We analyze enforcement of penalties under a convention styled after the OECD's 'Convention on Combating...