We study how financial development depends on trade openness and different types of institutions. In our model the elite can repress the financial market to keep their capital costs low and to preclude ordinary citizens from producing capital-intensive goods. Financial repression thus raises the...

We use investment-cash flow regressions to show that both asymmetric-information and agency problems are more severe in Continental Europe than in the Anglo-Saxon countries leading to too little investment by firms with attractive investment opportunities and too much by those with poor...

Comparative law and finance quantifies differences in the laws governing the business enterprise in various countries. The resulting data can be used to test which legal institutions (if any) matter for financial development. Until recently only cross-sectional data were available. We report the...

We study a rank-order tournament in which employees acquire and use private information for an investment decision. In this environment, competition can turn employees into yes men who make investment decisions that excessively agree with preconceived notions. The specter of yes-man behavior may...

With ideological parties being better informed about the state of the world than voters, the true motivation of policy proposals is hard to judge for the electorate. However, if reform proposals have to be agreed upon by government members with heterogeneous policy preferences, it may become...

In markets for credence goods, such as doctor visits, customers sample a firm for a few periods, before deciding whether to retain or fire that firm. In our model, customers have endogenously determined patience in tolerating bad outcomes from credence-good providers. The more competitive the...

Physicians choose capacity before demand materializes; actual demand may be higher or lower than capacity. If a physician's capacity exceeds demand, she may have an incentive to overtreat, i.e., she may provide unnecessary treatments to use up idle capacity. By contrast, with excess demand she...

We analyse a cheap-talk game where contrasting lobbies are asymmetrically informed. Equilibrium information transmission depends on each lobby's preference alignment with the legislator on the dimension of its expertise, and on the conflict of lobby interests. Full revelation is possible only...

We analyze the role of liability, insurance, and side payments for independent safety controls with unobservable care levels. By independent safety controls we mean that the accident probability depends on the care levels of two parties, and that the effects of the controls on the accident...

We consider the design of contracts in a principal-agent setting with two agents where each agent privately observes and reports to the principal a signal regarding the actions taken. We consider two cases: one where the agents observe the same signal and one where the agents observe different...