We examine an important class of decision problem under uncertainty that entails the standarrd portfolio problem and the demand for coinsurance. The agent faces a controllable risk -his demand for a risky asset for example- and a background risk. We determine how a change in the distribution in...

We analyze a model related to the strategic hereding literature where a second expert maximises his expected second period vvalue by conforming witj a first expert ("herding"). In contrast to the herdinfg literature we assume that an agent is most valuable if he is the only smart agent. We...

This paper shows how the instruments of incentive theory can be used to develop some views about the proper design of governments to avoid the capture of politicians and bureaucrats by interest groups.

We consider a model in which the agent faces two independant risks of losswith different probabilities of occurence and (possibly) different levels of potential loss. We show that it is optimal to select a deductable for the low probability event that is not larger than the optimal deductable...

This paper explores the implications of different institutional arrangements for allocating policy-making authority among confederated districts. Using a variation on the spatial model of political competition, we compare different rules for aggregating preferences acrossthese jurisdictions,...

This paper studies equilibrium refinements in continuous signaling games satifying the single-crossing condition. While most classical criteria select the Riley sparating equilibrium, it is first argued that this equilibrium is not necessarily the most appealing solution and that pooling...