The architecture of public decision making in the world is being changed through processes of “economic integration” and of “decentralization”. Some policy decisions are now taken at a higher level (i.e., monetary policy in Europe, trade policy in part of South America), while others are...

Generally when there is increased competition on one side of the market, the other side is better off. We study the effects of increased competition among sellers when there is a potentially corrupt agent who procures the good on behalf of a buyer. The model consists of a principal (the owner of...

We examine the problem of endogenous entry in a single-unit auction when the seller's welfare depends positively on the utility of a subset of potential bidders. We show that, unless the seller values those bidders?welfare more than her own ?private?utility, a nondiscriminatory auction is optimal.

In the standard moral hazard model, withholding of effort by the agent is not observable to the principal. We argue that this assumption has to be changed in applications that study corruption. The overwhelming majority of cases where corrupt politicians have been punished involve the detection...

The traditional principal-agent model assumes that the principal offers an exclusive contract to the agent. This paper shows that the standard results are not robust to the introduction of additional contracting opportunities for the agent. We analyze equilibria of an extended game with the...

Collective action clauses (CACs) are provisions specifying that a supermajority of bondholders can change the terms of a bond. We study how CACs determine governments’ fiscal incentives, sovereign bond prices and default probabilities in environments with and without contingent debt and IMF...

We show that, under independent private values, no mechanism that contains a right-of-first-refusal clause can maximize the sum of the utilities of the seller and the right-holder.

Ordinarily labor market equilibrium implies that the marginal worker is indifferent to employment, and that the employer is indifferent between equally productive employees. When the marginal worker is indifferent to employment, employer preferences do not matter. If, however, the marginal...