Prospect Theory (PT) has become the most credited alternative to Expected Utility Theory (EUT) as a theory of decision under uncertainty. This paper characterizes the optimal income tax and audit schemes under tax evasion, when taxpayers behave as predicted by PT. We show that the standard EUT...

We build a framework linking competition in the media market to political participation. Media outlets report on the ability of candidates running for office and compete for audience through their choice of slant. Citizens consume news only if the expected utility of being informed about...

This paper studies fiscal federalism when voter information varies across regions. We develop a model of political agency with heterogeneously informed voters. Rent-seeking politicians provide public goods to win the votes of the informed. As a result, rent extraction is lower in regions with...

Thinking of electoral rules, common wisdom suggests that proportional rule is more fair, since all voters are equally represented: at times, it turns out that this is false. I study the formation of both Parliament and Government; for the composition of the former I consider plurality and...

Public services provision depends on tax proceeds. The tax rate to finance public school is chosen through majority voting. Under the monotonicity condition implying that the preferred tax rate is decreasing in income, the literature predicts that the median voter is decisive and poor agents...

Anecdotal evidence and recent empirical work suggest that musicpiracy has differential effects on artists depending on their popularity.Existing theoretical literature cannot explain such differential effectssince it is exclusively concerned with single-firm models. We present amodel with two...

Direct incentives and punishments are the most common instruments to fight tax evasion. The theoretical literature disregarded indirect schemes, such as itemised deductions, in which an agent has an interest in that other agents declare their revenue. Itemised deductions provide an incentive for...

The literature on vouchers often concludes that a voucher-based system cannot be the outcome of a majority vote. This paper shows that it is possible to propose selective vouchers (of exogenous value) such that the majority of voters are in favour of selective vouchers. As long as the...