This Paper shows that the inability of regulators to commit to long-term contracts is irrelevant when there is some competition between regulated firms and when firms’ private information is correlated. This sharply contrasts with the dynamic of regulation without such competition. The Paper...

We propose a model of equilibrium contracting between two agents who are “boundedly rational” in the sense that they face time costs of deliberating current and future transactions. We show that equilibrium contracts may be incomplete and assign control rights: they may leave some...

This article has two objectives:Analyzes the impact of the introduction of tight solvency regulation for banks in transition economies. We show that, when the problems of soft budget constraints are severe, the introduction of these solvency regulations might paradoxically lead to a decrease of...

A prevalent feature in rating markets is the possibility for the client to hide the outcome of the rating process, after learning that outcome. This paper identifies the optimal contracting arrangement and the circumstances under which simple ownership contracts over ratings implement this...

This paper studies the efficiency of collusion between supervisors and supervisees. Building on Tirole (1986)’s results that deterring collusion with infinitely risk averse supervisors is impossible, while it is costless to do so under risk neutrality, we develop here a theory of collusion...

We propose a theory of supervision with endogenous transaction costs. A principal delegates part of his authority to a supervisor who can acquire soft information about an agent's productivity. If the supervisor were risk-neutral, the principal would simply make the better informed supervisor...

This paper examines the role of the information contained in stock prices in the regulation of privatized firms. Stock prices contain noisy but unbiased information about firm's future prospects that regulators can use to decide on some regulatory policies. The main argument developed is that...

This paper shows that supervision with soft information is valuable whenever supervisors and supervisees collude under "asymmetric" information and proceeds then to derive an "Equivalence Principle" between organizational forms of supervisory and productive activities. We consider an...