A firm can merge with one of n potential partners. The owner of each firm has private information about both his firm's stand-alone value and a component of the synergies that would be realized by the merger involving his firm. We characterize incentive-efficient mechanisms in two cases. First,...

The paper studies the equilibrium size of countries. Individuals in small countries have greater influence over the nature of political decision making while individuals in large countries have the advantage of more public goods and lower tax rates. The model implies that (i) there exists...

The quality of subjective performance evaluation is dependent on the incentive structures faced by evaluators, in particular on how they are monitored and themselves evaluated. Figure skating competitions provide a unique opportunity to study subjective evaluation. This paper develops a simple...

Researchers and state policymakers have hypothesized that the elderly may move to another state to avoid paying “death” (i.e., inheritance, estate, gift) taxes. This belief may be responsible for the recent revolution in state “death” tax policy whereby 30 states have eliminated their...

This paper analyzes a bilateral trade problem where the seller makes hidden investment that influences the buyer's private valuation. Complete contracts can be written on observable trade decisions. It is shown that efficiency level in investment and trade is negatively related to the scope of...

This paper reports a laboratory experiment to study pricing and advertising behavior in a market with costly buyer search. Sellers simultaneously post prices and decide whether or not to incur an exogenous cost to advertise their price. Sellers are not capacity constrained, and each buyer...

This paper shows that monitoring too much a partner in the initial phase of a relationship may not be optimal if the goal is to determine his loyalty to the match and if the cost of ending the relationship increases over time. The intuition is simple: by monitoring too much we learn less on how...

This paper is an adaptation of the Chamley-Gale endogenous-timing information-revelation model of investment (Econometrica 1994). It models a game with pure informational externality where agents can learn by observing others' actions. The social learning can result in herding and possibly in an...

We first point out that, using any of the current criteria for comparing information systems in principal-agent models with moral hazard (such as Kim (1994)'s criterion), it is often impossible to contrast the value of information obtained from different policies of contingent audits that bear...

This paper studies an internet trading mechanism similar to the one described in Peters and Severinov (2001) in a market where traders values are interdependent. It is shown that under reasonable conditions this mechanism has a perfect Bayesian equilibrium which supports allocations that...