We study the regulation of a firm with unknown demand and cost information. In contrast to previous studies, we assume demand is influenced by a quality choice, and the firm has private information about its quality capacity in addition to its cost. Under natural conditions, asymmetric...

This paper explores how to optimally set taxes and transfers when taxation authorities are uninformed about individuals' value of time in both market and nonmarket activities; and can observe both market-income and time allocated to market employment. We show that optimal redistribution in this...

We analyze a two-stage patent race. In the first phase firms seek to develop a research tool, an innovation that has no commercial value but is necessary to enter the second phase of the race. The firm that completes the second phase of the race first obtains a patent on the final innnovation...

This paper studies the impact of financing constraints on the equilibrium of a patent race. We develop a model where firms finance their R&D expenditures with an investor who cannot verify their effort. We solve for the optimal financial contract of any firm along its best-response function. In...

I reconsider Stiglitz's (1977) problem of monopolistic insurance with a continuum of types. Using a suitable transformation of control variables I obtain an analytical characterization of the optimal insurance policies. Closed form solutions and comparative statics results for special cases are...

We study the link between second-best production efficiency and the constraints on income distribution imposed by private ownership of firms in economies with Ramsey taxation. We review the result of Dasgupta and Stiglitz [1972], Mirrlees [1972], Hahn [1973], and Sadka [1977] about firm-specific...