A prevalent feature in rating markets is the possibility for the client to hide the outcome of the rating process, after learning that outcome. This paper identifies the optimal contracting arrangement and the circumstances under which simple ownership contracts over ratings implement this...

This paper shows that the inability of regulators to commit to long-term contracts is irrelevant when there is some competition between regulated firms and when firms' private information is correlated. This sharply contrasts with the dynamic of regulation without such competition. The paper...

We propose a theory of supervision with endogenous transaction costs. A principal delegates part of his authority to a supervisor who can acquire soft information about an agent's productivity. If the supervisor were risk-neutral, the principal would simply make the better informed supervisor...

We propose a model of equilibrium contracting between two agents who are quot;boundedly rationalquot; in the sense that they face time-costs of deliberating current and future transactions. We show that equilibrium contracts may be incomplete and assign control rights: they may leave some...

This paper derives an Equivalence Principle between organizational forms of supervisory and productive activities. We consider an organization with an agent privately informed on his productivity and a risk averse supervisor getting signals on the agent's type. In a centralized organization, the...

Regulatory independence from political control enlarges the collusive opportunities between regulators and interest groups. This is costly for current politicians because deterring capture becomes harder. However, independence also constrains future governments. Whenever future and current...