Previous experimental work provides encouraging support for some of the central assumptions underlying Hart and Moore (2008)'s theory of contractual reference points. However, existing studies ignore realistic aspects of trading relationships such as informal agreements and expost renegotiation....

This paper describes a mechanism designed to induce commercial banks to increase their willingness to extend loans in an economic environment characterized by increased uncertainty and diminished expectations. This mechanism is a new tool for the conduct of monetary policy to combat recessions.

We study experimentally persuasion games in which a sender (e.g., a seller) with private information provides verifiable but potentially vague information (e.g., about the quality of a product) to a receiver (e.g., a buyer). Various theoretical solution concepts such as sequential equilibrium or...

I consider a neoclassical growth model with endogenous labor supply in which agents have private information about their idiosyncratic value of leisure. A key assumption is that these shocks follow a persistent stochastic process over time. For this economy I solve the economy-wide mechanism...

We introduce intention-based social preferences into a Bayesian mechanism design framework. We first show that, under common knowledge of social preferences, any tension between material efficiency, incentive compatibility, and voluntary participation can be resolved. Hence, famous impossibility...

We consider a long-term contractual relationship in which a buyer procures a fixed quantity of a product from a supplier and then sells it on the market. The production cost is private information and evolves randomly over time. The solution to this dynamic principal-agent problem involves a...

This paper presents axiomatic models of decision making under uncertainty that avoid the use of a state space. The models are (a) general subjective expected utility theory with action-dependent subjective probabilities and effect-dependent utilities (the cases of effect-independent preferences...

We introduce intention-based social preferences into a mechanism design framework with independent private values and quasilinear payoffs. For the case where the designer has no information about the intensity of social preferences, we provide conditions under which mechanisms which have been...

We study the effects of granting an exit option that enables the private party to early terminate a PPP project if it turns out to be loss-making. In a continuous time setting with hidden information about stochastic operating profits, we show that a revenue-maximizing government can optimally...