A body of empirical work documents that most people believe they are above average in a variety of skills and abilities. This paper argues that such evidence does not necessarily imply that people process information in an irrational way. I build a model in which people can learn about their...

We analyze whether ease and speed of entry can mitigate the anti-competititve effects of a merger, in a dynamic model of endogenous merger. In our model, if new firms can enter quickly, it is more likely that merger is motivated by efficiency as opposed to increased market power. Thus, there is...

This article provides a simple theoretical model of trade secrets in hierarchical firms. A crucial assumption is that each manager has access to trade secrets pertaining to his own hierarchical level as well as to all lower levels. The article explores some implications of this assumption for...

We analyze whether ease and speed of entry can mitigate the anti-competititve effects of a merger, in a dynamic model of endogenous merger. In our model, if new firms can enter quickly, it is more likely that merger is motivated by efficiency as opposed to increased market power. Thus, there is...

We offer a novel view of employee discounts and in kind compensation. In our theory, bundling perks and cash compensation allows a firm to extract information rents from employees who have private information about their preferences for the perk and about their outside opportunities. We show...

Many argue that elements of a society's norms, culture or social capital are central to understanding its development. However, these notions have been difficult to capture in economic models. Here, we argue that trustworthiness is the economically relevant component of a society's culture and,...

This paper examines the effects of work-related perks, such as corporate jets and limousines, nice offices, secretarial staff, etc., on the optimal incentive contract. In a linear contracting framework, perks characterized by complementarities between production and consumption improve the...

Standard principal-agent theory predicts that large firms should not use employee stock options and other stock-based compensation to provide incentives to non-executive employees. Yet, business practitioners appear to believe that stock-based compensation improves incentives, and mounting...

This paper presents a theory of underdevelopment. It explains why developing countries may not be able to successfully implement the productive technologies or modes of organization used in developed ones. It also suggests ways around this problem of implementation, and provides an explanation...

We analyze a durable good monopolist's decision to adopt a new and more efficient technology that is readily available at no cost. After an initial period of learning by doing, the new technology can either lower the cost of production, or make the good more attractive to consumers. We show that...