Consider managers evaluating their employees' performances. Should managers justify their subjective evaluations? Suppose a manager's evaluation is private information. Justifying her evaluation is costly but limits the principal's scope for distorting her evaluation of the employee. I show that...

I show that legal uncertainty, i.e., uncertainty about the legality of a specific action, has positive welfare effects. Legal uncertainty works as a screening device provided that the threshold of legality is uncertain. The uncertainty discourages controversial actions, while it encourages...

Should principals explain and justify their evaluations? Suppose the principal's evaluation is private information, but she can provide justification by sending a costly cheap-talk message. If she does not provide justification, her message space is restricted, but the message is costless. I...

Should principals explain and justify their evaluations? In this paper the principal's evaluation is private information, but she can provide justification by sending a costly cheap-talk message. I show that the principal explains her evaluation to the agent if the evaluation turns out to be...

Subjective evaluations are widely used, but call for different contracts from classical moral-hazard settings. Previous literature shows that contracts require payments to third parties. I show that the (implicit) assumption of deterministic contracts makes payments to third parties necessary....

Individuals use narratives as rationales or justifications to make their claims more convincing. I provide a general framework for partial verifiability based on narratives. Narratives give many reasons and arguments. The receiver derives the message’s meaning by aggregating these reasons; her...

Consider legal uncertainty as uncertainty about the legality of a specific action. In particular, suppose that the threshold of legality is uncertain. I show that this legal uncertainty raises welfare. Legal uncertainty changes deterrence in opposite directions. The probability of conviction...

Promises are prevalent in many economic environments. They offer the opportunity to honor future obligations when promise keeping is observable. This paper studies the value of transparency and asks whether promises still work if such transparency is missing. We focus on the context of campaign...

In Spence's (1973) signaling by education model and in many of its extensions, firms can only infer workers' productivities from their education choices. In reality, firms also use sophisticated pre-employment auditing to learn workers' productivities. We characterize the trade-offs between...