In an industry where regulated firms interact with unregulated suppliers, we investigate the welfare effects of a merger between regulated firms when cost synergies are uncertain before the merger and their realization becomes private information of the merged firm. The optimal merger policy...

This paper derives conditions under which reputation enables certifiers to resist capture. These conditions alone have strong implications for the industrial organization of certification markets: 1) Honest certification requires high prices that may even exceed the static monopoly price. 2)...

At least two: the reputation of their brand and a reputation for being tough on imitators of this brand. Sustaining a brand requires both investment in its reputation amongst consumers and the defence of the brand against followers that infringe upon it. I study the defence of trade marks...

In a principal-agent model with hidden information and no monetary transfers, I establish the Veto-Power Principle: any incentive-compatible outcome can be implemented through veto-based delegation with an endogenously chosen default decision. This result demonstrates the exact nature of...

Policy makers often decide to liberalize foreign bank entry but at the same time restrict the mode of entry. We study how different entry modes affect the interest rate for loans in a model in which domestic banks possess private information about their incumbent clients but foreign banks have...

We consider a general class of imperfectly discriminating contests with privately informed players. We show that findings by Athey (2001) imply the existence of a Bayesian Nash equilibrium in monotone pure strategies.

In this paper we analyze the frequently observed phenomenon that (i) some members of a team (“black sheepâ€) exhibit behavior disliked by other (honest) team members, who (ii) nevertheless refrain from reporting such misbehavior to the authorities (they set up a “wall of...

We consider social contracts for resolving conflicts between two agents who are uncertain about each other's fighting potential. Applications include international conflict, litigation, and elections. Even though only a peaceful agreement avoids a loss of resources, if this loss is small enough,...

Reputation systems aim to induce honest behavior in online trade by providing information about past conduct of users. Online reputation, however, is not directly connected to a person, but only to the virtual identity of that person. Users can therefore shed a negative reputation by creating a...