We consider an economy where property rights are necessary to ensure sufficient rewards to ex-ante investments. Because enforcement of property rights influences the ex-post distribution of rents, there is room for corruption. We characterize the optimal organization of society and the optimal...

We present a simple model to analyse law enforcement problems in transition economies. Law enforcement implies coordination problems and multiplicity of equilibria due to a law abidance and a fiscal externality. We analyse two institutional mechanisms for solving the coordination problem. A...

Local network externalities are present when the utility of buying from a firm not only depends on the number of other customers (global network externalities), but also on their identity and/or characteristics. We explore the consequences of local network externalities within a framework where...

A 'folk theorem' originating, among others, in the work of Stiglitz maintains that competitive equilibria are always or 'generically' inefficient (unless contracts directly specify consumption levels as in Prescott and Townsend, thus bypassing trading in anonymous markets). This paper critically...

We revisit the question of the efficiency of individual decisions to be protected against crime for the cases of both observable and unobservable protection. We obtain that observable protection is unambiguously associated with a negative externality and that at the individual level, it has a...