We provide elementary insights into the effectiveness of certification to increase market transparency. In a market with opaque product quality, sellers use certification as a signaling device, while buyers use it as an inspection device. This difference alone implies that seller-certification...

We provide elementary insights into the effectiveness of certification to increase market transparency. In a market with opaque product quality, sellers use certification as a signaling device, while buyers use it as an inspection device. This difference alone implies that seller-certification...

type="main" <p>Using an agency model, we show how delegation, by generating additional private information, improves dynamic incentives under limited commitment. It circumvents ratchet effects and facilitates the revelation of persistent private information through two effects: a play-hardball...</p>

Uncertainty in election outcomes generates politically induced regulatory risk. For monopoly regulation, political parties\' risk attitudes towards such risk depend on a fluctuation effect that hurts both parties and an output--expansion effect that benefits at least one party. Irrespective of...

In mechanism design with (partially) verifiable information, the revelation principle holds if allocations are modelled as the Cartesian product of outcomes and verifiable information, giving rise to evidence-contingent mechanisms. Consequently, incentive constraints characterize the...

We study an organization with a top management (principal) and multiple subunits (agents) with private information that determine the organization\'s aggregate efficiency. Under centralization, eliciting the agents\' private information may induce the principal to manipulate aggregate...

We study an agency model with vertical hierarchy—the principal, the prime‐agent and the subagent. The principal faces a project that needs both agents' services. Due to costly communication, the principal receives a report only from the prime‐agent, who receives a report from the subagent....

Crowdfunding provides the innovation that, before the investment, entrepreneurs contract with consumers. Under demand uncertainty, this improves a screening for valuable projects. Entrepreneurial moral hazard threatens this benefit. Focusing on the trade-off between value screening and moral...

This paper studies interim randomization in contracting settings with multi-sided incentive problems. More specifically, we show that in a principal-agent model with auditing the principal mitigates a non-contractibility of auditing by conditioning the contract on a random signal that is...