We study the cost-of-adjustment model of investment when there is asymmetry of information between owners (the principal) and managers (the agent). Information asymmetry distorts the relationship between investment and the cost of capital for all agent types, and a regime of inaction appears...

A model is developed to study the implications of the presence of rent-opposing activities for the measurement of deadweight losses and for cost-benefit analysis. The analysis provides an upper bound on the social cost of rent-seeking in the presence of potential rent-opposers. Remarks are...

We consider a differential game between two players, where one player has the first-mover advantage. We compare the equilibrium of this model with the one generated by a conventional symmetric model. The existence of a first mover results in more conservationist exploitation in the aggregate. We...

With several identical deposits of an exhaustible non-reproducible resource, the working of a deposit entails a set-up cost but no other cost. The deposits must be extracted in strict sequence with jump discontinuities of marginal benefits at transition points. Moreover, the average rate of...

We consider the evolution of preferences when trade occurs between two countries. We show that if one country is much larger than the other, its preferences can eventually take over the preferences of the second country. This result may provide an explanation of why small countries sometimes...

We study the role of tax share and transparency of governance on growth and stagnation. A local government maximizes its private benefits using two activities. The first one consists of providing local public goods that help local firms to increase profits, thus enlarging tax revenue. The second...

We show that, even with flexible domestic wages, international outsourcing may worsen the welfare of the home country and reduce the profits of all firms. If wages are rigid, outsourcing is welfare-improving if and only if the sum of the “trade creation” effect and the “exploitation...