The empirical performance of macroeconomic exchange rate models is more than disappointing. This dismal result is also reflected in the forecasting capabilities of professional analysts: all in all, analysts are not in a position to beat naïve random walk forecasts. The root for this deficient...

We study a class of representation mechanisms, based on reports made by a random subset of agents, called representatives, in a collective choice problem with quasi-linear utilities. We do not assume the existence of a common prior probability describing the distribution of preference types. In...

We consider a bargaining model of the interaction between a government and interest groups in which, unlike existing models, neither side is assumed to have all the bargaining power. The government will then find it optimal to constrain itself in the use of transfer policies to improve its...

The Most-Favored Nation (MFN) clause has long been suspected of creating a free rider problem in multilateral trade negotiations. To address this issue, we model multilateral negotiations as a mechanism design problem with voluntary participation. We show that an optimal mechanism induces only...

Behavioral economics presents a "paternalistic" rationale for a benevolent government's intervention. We consider an economy where the only “distortion” is agents’ time inconsistency. We study the desirability of various forms of collective action, ones pertaining to costly commitment and...

Consider a group of agents whose goal is to reform the status quo if and only if this is Pareto improving. Agents have private information and may have common or private objectives, which creates a tension between information aggregation and minority protection. We propose a simple voting system...

This Paper analyses bargaining between the European Parliament (EP) and the Council of Ministers (CM) in the Conciliation Committee with the aim of evaluating both institutions' power in the European Union's codecision procedure. In contrast to other studies, which use power indices or simple...

This paper develops a method to estimate information rents of losers of a reform who receive a monetary compensation. Our method explicitly accounts for survey respondents' reluctance to reveal a willingness to accept which is smaller than the actual compensation. We apply our approach to the...

We consider a linguistically diversified society that has to select a set of official languages. We examine the notion of language disenfranchisement that is created when one or more languages fail to be included in the list of the official ones, implying that some individuals are denied full...

Economists generally assume the existence of sufficient institutions to sustain a market economy and tax the citizens. However, this starting point cannot easily be taken for granted in many states, neither in history nor in the developing world of today. This paper develops a framework where...