When one victim's precautions against crime have spillover benefits to other victims, individuals do not take the socially optimal amount of precaution. I explore the use of criminal sanctions as a mechanism to correct this: Criminals are punished based on the level of precaution taken by the...

When one victim's precautions against crime have spillover benefits to other victims, individuals do not take the socially optimal amount of precaution. I explore the use of criminal sanctions as a mechanism to correct this: Criminals are punished based on the level of precaution taken by the...

We modify the principal-agent model with moral hazard by assuming that the agent is expectation-based loss averse according to Köszegi and Rabin (2006, 2007). The optimal contract is a binary payment scheme even for a rich performance measure, where standard preferences predict a fully...

An entrepreneur with information about firm quality seeks financing from an uninformed investor in order to pay a worker. I show that if the worker, too, knows the true quality of the firm, then certain long term wage agreements can credibly signal firm quality. Such wage agreements have a low...