I develop a model of rent seeking with informational foundations and an arbitrary number of rent seekers, and I compare the results with Tullock's (1980) classic model where the influence activities are "black-boxed." Given the microfoundations, the welfare consequences of rent seeking can be...

This Paper introduces optimal competition: the best form of competition in an industry that a competition authority can achieve (given the information constraint that it cannot observe firms’ efficiency levels). We show that the optimal competition outcome in an industry becomes more...

Contractual execution generates hard information, available to the contracting parties, even when contracts are secretly executed. Building on this simple observation, the paper shows that incomplete contracts can be preferred to complete contracts. This is because (i) execution of incomplete...

In this paper we examine the causal impact of competition on management quality. We analyze the hospital sector where geographic proximity is a key determinant of competition, and English public hospitals where political competition can be used to construct instrumental variables for market...

In recent decades, many firms offered more discretion to their employees, often increasing the productivity of effort but also leaving more opportunities for shirking. These "high-performance work systems" are difficult to understand in terms of standard moral hazard models. We show...

How many cartels are there? The answer is important in assessing the efficiency of competition policy. We present a Hidden Markov Model that answers the question, taking into account that often we do not know whether a cartel exists in an industry or not. Our model identifies key policy...

Using a general two-stage framework, this paper gives sufficient conditions for increasing competition to have negative or positive effects on R&D-investment, respectively. Both possibilities arise in plausible situations, even if one uses relatively narrow definitions of increasing competition....

Recent theoretical models argue that a bank’s organizational structure reflects its lending technology. A hierarchically organized bank will employ mainly hard information, whereas a decentralized bank will rely more on soft information. We investigate theoretically and empirically how bank...

In an environment in which both buyers and sellers can undertake match specific investments, the presence of market competition for matches may solve hold-up and coordination problems generated by the absence of complete contingent contracts. In particular, this Paper shows that when matching is...

We study the effects of reputation and competition in a stylized market for experience goods. If interaction is anonymous, such markets perform poorly: sellers are not trustworthy, and buyers do not trust sellers. If sellers are identifiable and can, hence, build a reputation, efficiency...