I show that legal uncertainty, i.e., uncertainty about the legality of a specific action, has positive welfare effects. Legal uncertainty works as a screening device provided that the threshold of legality is uncertain. The uncertainty discourages controversial actions, while it encourages...

Most insurance companies publish few data on the occurrence and detection of insurance fraud. This stands in contrast to the previous literature on costly state verification, which has shown that it is optimal to commit to an auditing strategy, as the credible announcement of thoroughly auditing...

Most insurance companies publish few data on the occurrence and detection of insurance fraud. This stands in contrast to the previous literature on costly state verification, which has shown that it is optimal to commit to an auditing strategy, as the credible announcement of thoroughly auditing...

Different models of uncertainty aversion imply strikingly different economic behavior. The key to understanding these differences lies in the dichotomy between first-order and second-order ambiguity aversion which I define here. My definition and its characterization are independent of specific...

Different models of uncertainty aversion imply strikingly different economic behavior. The key to understanding these differences lies in the dichotomy between first-order and second-order ambiguity aversion which I define here. My definition and its characterization are independent of specific...

Most insurance companies publish few data on the occurrence and detection of insurance fraud. This stands in contrast to the previous literature on costly state verification, which has shown that it is optimal to commit to an auditing strategy, as the credible announcement of thoroughly auditing...

Most insurance companies publish few data on the occurrence and detection of insurance fraud. This stands in contrast to the previous literature on costly state verification, which has shown that it is optimal to commit to an auditing strategy, as the credible announcement of thoroughly auditing...

Should principals explain and justify their evaluations? In this paper the principal's evaluation is private information, but she can provide some justifications by sending a costly message. Indeed, it is optimal for the principal to explain her evaluation to the agent if and only if the...

I show that legal uncertainty, i.e., uncertainty about the legality of a specific action, has positive welfare effects. Legal uncertainty works as a screening device provided that the threshold of legality is uncertain. The uncertainty discourages controversial actions, while it encourages...