How can banks and similar institutions design optimal compensation systems? Would such systems conflict with the goals of society? This paper considers a theoretical framework of how banks structure job contracts with their employees to explore three points: the structure of a socially optimal...

There is now an extensive literature regarding the efficient design of incentive mechanisms in dynamic environments. In this literature, there are no exogenous links across time periods because either privately observed shocks are assumed time independent or past private actions have no...

This paper presents a full characterization of the equilibrium value set of a Ramsey tax model. More generally, it develops a dynamic programming method for a class of policy games between the government and a continuum of consumers. By selectively incorporating Euler conditions into a strategic...

This study argues that both unequal opportunity and social mobility are necessary implications of an efficient societal arrangement when incentives must be provided.

This paper develops new recursive methods for studying stationary sequential equilibria in games with private monitoring. We first consider games where play has occurred forever into the past and develop methods for analyzing a large class of stationary strategies, where the main restriction is...

This paper presents a simple model of government reputation which captures two characteristics of policy outcomes in less developed countries: governments which betray public trust do so erratically, and, after a betrayal, public trust is regained only gradually.

This paper considers the question, Does the limited liability associated with banking make it necessary for a government to regulate bank employee compensation? It attempts to shed light on this question by considering a mechanism design framework.