Entrusting the power to punish to a central authority is a hallmark of civilization. We study a collective action dilemma in which self-interest should produce a sub-optimal outcome absent sanctions for non-cooperation. We then test experimentally whether subjects make the theoretically optimal...

The sanctioning of norm-violating behavior by an effective formal authority is an efficient solution for social dilemmas. It is in the self-interest of voters and is often favorably contrasted with letting citizens take punishment into their own hands. Allowing informal sanctions, by contrast,...

Many studies of the determinants of investment use Tobin’s T to control for the investment opportunities of a firm. Tobin’s T roughly measures the average return on a firm’s capital anticipated by the market. More relevant for investment decisions, however, is the marginal return on...

We look at a simple market with two-sided heterogeneity and pairwise meetings. On the supply side are two landlord types who differ in the quality of their apartments. On the demand side is a continuum of tentant types who differ in their valuations for apartment types and their patience. For...

We model the structure of a firm or an organization as a network and consider minimum-effort games played on this network as a metaphor for cooperations failing due to coordination failures. For a family of behavioral rules, including Imitate the Best and the Proportional Imitation Rule, we show...

We let consumers vote on tax regimes in experimental markets. We test if taxes on sellers are more popular than taxes on consumers, i.e. on voters themselves, even if taxes on sellers are inefficiently high. Taxes on sellers are more popular if voters underestimate the extent of tax shifting in...

This article shows that entry of a more input-effcient, but lower quality downstream producer, compared to a high-quality downstream incumbent, might be detrimental to social welfare. In particular, if the entrant is extremely ecient, a monopolist upstream supplier reacts by charging an...

This paper proposes a dynamic politico-economic theory of intergenerational contracts, whose driving force is the intergenerational confict over government spending. Embedding a repeated probabilistic voting setup in a standard OLG model with human capital accumulation, we find that the...

Fiscal federalism is often hailed as an innovation procedure: successful policy experiments in one jurisdiction will, via imitation, spread through the entire system, leading to overall better policy performance. We show that such hopes set in laboratory federalism may be ill-founded. For a...

This paper develops a model to analyze the effects of immigration by skill on the outcome of a majority vote among natives on both the size as well as the composition of public spending. Public spending can be of two types, spending on rival goods (transfers) and on non-rival goods (public...