We augment the canonical neoclassical model of trade to allow for interstate disputes over land, oil, water, or other resources. The costs of such disputes in terms of arming depend on the trade regime in place. Under either autarky or free trade, the larger country (in terms of factor...

The means of contest design may include differential taxation of the prize. This paper establishes that, given a revenue-maximizing contest designer who faces a balanced-budget constraint, the optimal taxation scheme corresponding to an all-pay auction is appealing in two senses. First, it...

This paper evaluates direct and structural discrimination as a means of increasing efforts in the most widely studied contests. We establish that a designer who maximizes efforts subject to a balanced-budget constraint prefers dual discrimination, namely, change of the contestants ́prize...

This paper presents a new model of interest groups and policy formation in the legislature. In our setting, the already given party ideological predispositions and power distribution determine the expected policy outcome. Our analysis applies to the case of un-enforced or enforced party...

This paper presents a new model of interest groups and policy formation in the legislature. In our setting, the already given party ideological predispositions and power distribution determine the expected policy outcome. Our analysis applies to the case of un-enforced or enforced party...

Long-term beneficial welfare state reforms not only face opposition from powerful insiders and beneficiaries of the system in place. While potential losers from a policy change are often relatively easy to spot, ewll-designed reforms generate mostly diffuse gains, and the potential winners are...

This Article presents a case study in how complexity arising from the evolu- tion and proliferation of a financial innovation can increase systemic risk. The subject of the case study is the securitization of home loans, an innovation which played a critical and still not fully understood-role...

Firms recently face considerable challenges caused by a rather pervasive trend of globalizing economic transactions. Confronted with this challenge, firms are forced to develop and sustain competitive advantages in particular by proactive moves of service innovations to secure their market...

In this paper, we study how between-group wealth and size heterogeneity affect success probabilities as well as aggregate rent-seeking efforts when two groups compete for the allocation of a pure public good. Unlike with previous models, we measure the utility cost of rent-seeking in terms of...