This paper shows that monitoring too much a partner in the initial phase of a relationship may not be optimal if the goal is to determine his loyalty to the match and if the cost of ending the relationship increases over time. The intuition is simple: by monitoring too much we learn less on how...

The assumption of internationally identical factor intensity techniques may be one of the major causes of the HOV model's poor performance. To relax this assumption, detailed input-output data are required to compute the factor intensity techniques used in different countries; however, these...

A firm can merge with one of n potential partners. The owner of each firm has private information about both his firm's stand-alone value and a component of the synergies that would be realized by the merger involving his firm. We characterize incentive-efficient mechanisms in two cases. First,...

We first point out that, using any of the current criteria for comparing information systems in principal-agent models with moral hazard (such as Kim (1994)'s criterion), it is often impossible to contrast the value of information obtained from different policies of contingent audits that bear...

This paper studies an internet trading mechanism similar to the one described in Peters and Severinov (2001) in a market where traders values are interdependent. It is shown that under reasonable conditions this mechanism has a perfect Bayesian equilibrium which supports allocations that...

In this paper I describe group theoretic methods that can be used for analyzing the boundary problems, which arise when the Hamiltonian method is applied to solve the relaxed problem for the multidimensional screening problem. This technique can provide some useful insights into the structure of...

I study preferences defined on the set of real valued random variables as a model of economic behavior under uncertainty. It is well-known that under the Independence Axiom, the utility functional has an expected utility representation. However, the Independence Aiom is often found contradictory...

Willig (1976) argues that the change in consumer's surplus is often a good approximation to the willingness to pay for a price change: if the income elasticity of demand is small, or the price change is small, then the percentage error from using consumer's surplus is small. If the price of a...

This paper studies how the arrival of more precise information affects welfare in an economy with incomplete and differential information. We consider a single period, pure exchange economy with aggregate uncertainty in which agents show different attitudes towards risk: wealthy individuals are...

This paper analyzes a bilateral trade problem where the seller makes hidden investment that influences the buyer's private valuation. Complete contracts can be written on observable trade decisions. It is shown that efficiency level in investment and trade is negatively related to the scope of...