Riordan and Sappington (JET, 1988) show that in an agency relationship in which the agent's type is correlated with a public ex post signal, the principal may attain first best (full surplus extraction and efficient output levels) if the agent is faced with a lottery such that each type is...

A nudge is a non-coercive paternalistic intervention that attempts to improve choices by manipulating the framing of a decision problem. As any paternalism, it faces the difficulty of determining the appropriate welfare criterion. We propose a welfare-theoretic foundation for nudging similar in...

Information about the future may be instrumentally useful, yet scary. For example, many patients shy away from precise genetic tests about their dispositions for severe diseases. They are afraid that a bad test result could render them desperate due to anticipatory feelings. We show that...

We provide a framework for inference in dynamic equilibrium models including financial market data at daily frequency, along with macro series at standard lower frequency. Our formulation of the macro-finance model in continuous-time conveniently accounts for the difference in observation...

Properties of dynamic stochastic general equilibrium models can be revealed by either using numerical solutions or qualitative analysis. Very precise and intuition-building results are obtained by working with models which provide closed-form solutions. Closed-form solutions are known for a...

This paper explores the role of information transmission and misaligned interests across levels of government in explaining variation in the degree of decentralization across countries. Within a two-sided incomplete information principal-agent framework, it analyzes two alternative...

Using an agency model, we show how delegation, by generating additional private information, improves dynamic incentives under limited commitment. It circumvents ratchet effects and facilitates the revelation of persistent private information through two effects: a play-hardball effect, which...

Strategic delegation to an independent regulator with a pure consumer standard improves dynamic regulation by mitigating ratchet effects associated with short term contracting. A pure consumer standard alleviates the regulator's myopic temptation to raise output after learning the firm is...

We study ex post information rents in sequential screening models where the agent receives private ex ante and ex post information. The principal has to pay ex post information rents for preventing the agent to coordinate lies about his ex ante and ex post information. When the agent's ex ante...