We analyze a principal-agent model with moral hazard in which the principal has private information about the technology, and the contract offered by her may signal this information to the agent. We characterize Perfect Bayesian Equilibria of the game that possess the following properties that...

In this paper we are concerned with the performance of stock option contracts in the provision of managerial incentives. In our simple framework, we restrict the space of contracts available to the principal to those conformed by a fixed payment and a package of call options on the firm's stock....

We introduce and solve a new class of static portfolio choice problems, where only the best realized alternative matters. A decision maker must simultaneously choose among independent ranked options, and the better alternatives have a lower chance of panning out. Each choice is costly, and just...

A large empirical literature investigates the link between "openness" and growth. Cross-country observations suggest that (i) "openness" enhances growth by increasing a country's rate of investment, and (ii) variables related to equipment investment are robustly and strongly correlated with...

This paper analyzes the effect of market power in a model with dynamic and biological externalities. When several countries harvest fish in international waters the evolution of fish population is affected by their joint action, thus, generating a biological and a dynamic externality. If there...

FOMC meeting days provide a natural laboratory for exploring the effects of policy uncertainty and learning on exchange rate determination. Intradaily mark/dollar exchange rates are employed for 10 FOMC meetings. The meetings examined are the first 10 following the February 1994 change in policy...

The amount of wealth allocated to a particular risky asset depends on the riskiness of the asset. When an insurance policy against losses from holding the asset is made available, then this allocation can also depend on the form and the price of the insurance. The purpose of this research is to...

We examine bequest-sharing rules where wasteful competition for bequests is possible by children. We show that equal division minimizes rent-seeking expenditures by siblings. Finally, we employ a theory of rational social norms in order to discuss the evolution of bequest norms in the Middle...

This note reestimates Grossman and Krueger’s (1993) SO2 emissions regression including regressors to capture the effects of scale, trade and trade policy. Several new results are obtained. Increases in economic activity have a negative effect on the environment separate from changes in per...

We introduce the possibility of trade in dynamic models with externalities and evaluate the consequences on the capital accumulation process, the market-clearing prices and policy making. We consider mixed economies characterized by a blend of strategic and nonstrategic sectors. An equilibrium...