This paper extends the revelation principle to environments in which the mechanism designer cannot fully commit to the outcome induced by the mechanism. We show that he may optimally use a direct mechanism under which truthful revelation is an optimal strategy for the agent. In contrast with the...

In a finitely repeated principal agent relationship with adverse selection I study (exogenous) interim information that is revealed during a long term relationship. Interim information mitigates adverse selection. Verifiability, measured by the cost of signal manipulation, and the signal's...

This paper offers an explanation why governments have limited commitment and are susceptible to the ratchet effect. It analyzes a two period model in which a government with full commitment regulates a firm. Each period is predated by an election. If contracts of previous governments tie newly...

This paper studies the interplay between advice and agency costs in entrepreneurial financing. We show that advise may exacerbate agency problems, because the agent may use it at the investor's expense and thereby hurt investors. Depending on the magnitude of the agency problem, optimal...

This paper provides new analytical tools for studying principal{agent problems with adverse selection and limited commitment. By allowing the principal to use general communication devices we overcome the literature's common, but overly restrictive focus on one{shot, direct communication. In...

This paper shows that, contrary to what is generally believed, decreasing concavity of the agent's utility function with respect to the screening variable is not sufficient to ensure that stochastic mechanisms are suboptimal. The paper demonstrates, however, that they are suboptimal whenever the...

The paper studies procurement contracts with pre--project investigations under hidden information and hidden action. The principal generally benefits from inducing the agent to conduct pre--project investigations to avoid cost overruns and false project cancelations. Due to a rent effect, hidden...

This paper considers a team in which production takes place sequentially and in which agents observe the actions taken by previous agents. We show that for such teams sharing rules exist which are balanced and induce efficient production as the unique equilibrium outcome. This in contrast to...

I evaluate German regulation that requires retail discounters to guarantee the availability of their products in bargain sales. The regulation is meant to prevent loss leaders. Retailers however claim that rationing is due to demand uncertainty and thereby undermine the regulation's rationale....

For mechanism design with independent values, we identify a subclass of Vickrey--Clarke--Groves (VCG) mechanisms that induce efficient ex ante investments even with externalities. The Vickrey second price auction does not belong to this class.