A single principal interacts with several agents, offering them contracts. The crucial assumption of this paper is that the outside-option payoffs of the agents depend positively on how many free agents there are (these are agents who are not under contract). We study how such a principal,...

This paper studies the evolution of political institutions in the face of conflict. We examine institutional reform in a class of pivotal mechanisms -- institutions that behave as if the resulting policy were determined by a "pivotal" decision maker drawn from the potential population of...

This paper examines existence of Markov equilibria in the class of dynamic political games (DPGs). DPGs are dynamic games in which political institutions are endogenously determined each period. The process of change is both recursive and instrumental: the rules for political aggregation at date...

We develop a model that incorporates both spatial heterogeneity and adverse selection to examine the features of optimal prices paid by an agency purchasing a bundle of services on behalf of consumers with different underlying characteristics. Service bundles are two dimensional, and to be...

How far is the US social insurance system from an efficient system? We answer this question within a model where agents receive idiosyncratic, labor-productivity shocks that are privately observed. When social security and income taxation comprise the social insurance system, the maximum...

Why would a political elite voluntarily dilute its political power by extending the franchise? This paper develops a dynamic recursive framework for studying voter enfranchisement. We study properties of dynamic enfranchisement games, dynamic games in which political rights evolve over time....

We consider the problem of sequential search when the decision to stop searching is made by a committee. We show that a symmetric stationary equilibrium exists and is unique given that the distribution of rewards is log concave. Committee members set a lower acceptance threshold than do...

This paper addresses the striking ability of transaction flows to explain exchange rate movements. Specifically, we examine whether this arises because transaction flows convey incremental information about fundamentals. If so, then these flows should affect price upon their realization and...

Energy costs are included in the monthly rent of one fourth of U.S. apartment residents. Because these tenants do not face the marginal cost of their own energy use, they have little incentive to use energy efficiently. Explanations for this apparent market failure fall into two categories: the...

We find an economic rationale for the common sense answer to the question in our title -- courts should not always enforce what the contracting parties write. We describe and analyze a contractual environment that allows a role for an active court. An active court can improve on the outcome that...