The author models the links between residential choice, education, and productivity in a city composed of several communities. Local complementarities in human capital investment induce occupational segregation, although efficiency may require identical communities. Even when some asymmetry is...

Access to private information is shown to generate both the incentives and the ability to manipulate asset markets through strategically distorted.announcements. The fact that privileged information is noisy interferes with the public's attempts to learn whether such announcements are honest; it...

We develop a theory of moral behavior, individual and collective, based on a general model of identity in which people care about "who they are" and infer their own values from past choices. The model sheds light on many empirical puzzles inconsistent with earlier approaches. Identity...

This paper shows how the optimal financial structure of a firm complements incentive schemes to discipline managers, and how the securities' return streams determine the claimholders' incentives to intervene in management. The theory rationalizes (1) the multiplicity of securities, (2) the...

This paper analyzes the organization of the R&D activity in an incomplete contract framework. It provides theoretical foundations to understand how the allocation of property rights on innovations may affect both the frequency and the magnitude of these innovations; to rationalize commonly...

We analyze the value placed by rational agents on self-confidence, and the strategies employed in its pursuit. Confidence in one's abilities generally enhances motivation, making it a valuable asset for individuals with imperfect willpower. This demand for self-serving beliefs (which can also...

This paper argues that parties regulate competition among like-minded factions so as to enhance reputation building by, and voter trust in, the politicians standing for a given cause. While intra- and interparty competition contributes to keeping politicians on their toes, unbridled competition...

International surveys reveal wide differences between the views held in different countries concerning the causes of wealth or poverty and the extent to which people are responsible for their own fate. At the same time, social ethnographies and experiments by psychologists demonstrate...

The paper develops an agency-theoretic approach to interest-group politics and shows the following: (1) the organizational response to the possibility of regulatory agency politics is to reduce the stakes interest groups have in regulation; (2) the threat of producer protection leads to...