If buyers do not observe the quality of a product and production of quality is costly, market allocations can be very inefficient. Certification intermediaries are institutions that provide information about quality to buyers. The amount of information in the market determines the incentives...

Voluntary agreements with industry offer many examples of overcompliance with respect to environmental standards. Such phenomena seem to be irrational but appear less surprising considering firms' strategies are aimed to internalise environmental quality. We model the choice of the environmental...

In a society composed of a ruler and its citizens: what are the determinants of the political equilibrium between these two? This paper approaches this problem as a game played between a ruler who has to decide the distribution of the aggregate income and a group of agents/citizens who have the...

We consider a game of information transmission, with one informed decision maker gathering information from one or more informed senders. Private information is (conditionally) correlated across players, and communication is cheap talk. For the one sender case, we show that correlation...

This paper reports results from a laboratory experiment on network formation among heterogeneous agents. The experimental design extends the Bala-Goyal (2000) model of network formation with decay and two-way flow of benefits by allowing for agents with lower linking costs or higher benefits to...

We study mechanisms for environments in which only some of the agents are directly connected to a mechanism designer and the other agents can participate in a mechanism only through the connected agents' referrals. In such environments, the mechanism designer and agents may have different...

We develop a theoretical model in which firms may choose multiple banking relationships to reduce the risk that financing will be denied by "relationship banks" should the latter experience liquidity problems and refuse to roll over lines of credit. The inability to refinance from relationship...

When liability for environmental spills, product failures, or other types of accidents is imposed on firms with insufficient wealth, those firms may file for bankruptcy ---thereby becoming ''judgement proof''--- as soon as a major accident occurs. As a result, they are unlikely to choose...

Recent literature has pointed out that information asymmetries may be the reason for the poor performance of structural credit risk models to fit corporate bond data. It is well known in fact that these models lead to a strong understatement of the credit spread terms structure, particularly on...

This paper studies a noncooperative model of network formation. Built upon the two-way flow model of Bala and Goyal (2000a), it assumes that information decay as it flows through each agent, and the decay is increasing and concave in the number of his links. This assumption results in the fact...