Prostitution is a multi-billion dollar, globally distributed, low-concentration service industry that is receiving increasing attention in the economics literature. This article focuses on a widespread, but little studied, feature of this environment—the role of intermediaries (pimps or...

Economists argue that rich information environments and formal enforcement of contracts are necessary to prevent market failures when information asymmetries exist. We test for the necessity of formal enforcement to overcome the problems of asymmetric information by estimating the value of...

Asymmetric information is a leading explanation for settlement failure that results in a costly trial. Typically, the information in question is assumed to have bilateral payoff relevance, meaning it affects the expected payoffs of both the plaintiff and defendant. When there is bilateral payoff...

We extend the 1986 signaling model of Reinganum and Wilde by allowing for the possibility of negative expected value (NEV) suits. If filing costs are zero, the equilibrium consistent with the D1 refinement implies that settlement offers face a rejection rate of 100%. If filing costs are...

We analyze contingency fees in the Reinganum and Wilde (1986) signaling model of litigation. The effect of contingency fees on settlement depends on the details of the contingency fee contract and the nature of the informational asymmetry assumed in the model. Introducing bifurcated fee...

We use national data from 1960 to 2000 to estimate the demand for pharmaceuticals in the United States. We then simulate consumer surplus gains from a hypothetical drug price control policy that would have limited drug price increases to the rate of inflation from 1981 to 2000. Using a range of...

Richard Epstein has argued that governments should pay compensation for regulatory actions that impose costs on a subset of society. I develop a model in which there are two groups, one of whom benefits from a regulation, and one of whom bears the costs. A potentially biased government sets the...

This paper models the modern merger review process in which an enforcement agency, here the Federal Trade Commission (FTC), interacts with the acquiring firm to determine the outcome of antitrust regulation. Our empirical implementation of a game theoretic analysis tests whether decisions are...