We explore the role of firms in insuring non-verifiable output. As a device that allows workers to commit to the delivery of their output, the firm arises endogenously as an alternative to the market if workers are sufficiently risk averse and the firm can base its incentive payments on good...

This paper empirically analyzes moral hazard in car insurance using a dynamic theory of an insuree's dynamic risk (ex ante moral hazard) and claim (ex post moral hazard) choices and Dutch longitudinal micro data. We use the theory to characterize the heterogeneous dynamic changes in incentives...

We investigate the presence of moral hazard and advantageous or adverse selection in a market for supplementary health insurance. For this we specify and estimate dynamic models for health insurance decisions and health care utilization. Estimates of the health care utilization models indicate...

Transparent decision-making processes are widely regarded as a prerequisite for the working of a representative democracy. It facilitates accountability, and citizens may suspect that decisions, if taken behind closed doors, do not promote their interests. Why else the secrecy? We provide a...

Some committees are made up of experts, persons interested in both the (subject) matter at hand and in coming across as able decision-makers. Such committees would like to conceal disagreement from the public. We present a theory that describes the reaction of experts to the requirement to...

In a multiperiod setting, decision-makers can learn about the consequences of their decisions through experimentation. In this paper we examine how in a two-party system polarization and political instability affect learning through experimentation. We distinguish two cases: <OL> <LI>the decision to be...</li></ol>

We develop a simple two period model to study the importance of motivational differences among politicians in describing the role of elections and explaining policy choices. In our model, politicians differ in their motives of running public office. Good politicians care about policies while bad...

In models of sequential decision making herd behaviour occurs if the signals smart (dumb) agents receive are (un)correlated and if agents have reputational concerns. We show that introducing costly effort to become informed about project payoffs (i) eliminates herd behaviour and (ii) shifts...

A committee makes a decision on a project on behalf of "the public." Members of the committee agree on the a priori value of the project, and hold additional private information about its consequences. They are experts who care about the value of the project and about being considered well...

We analyze the dynamics of Chinese comparative advantage as measured by export shares and the Balassa index using 3-digit and 4-digit sectors for the period 1970 – 1997. We use novel tools to identify periods of rapid structural change and the persistence of comparative advantage, such as...