"We develop a model to study the interplay between advice and agency costs in entrepreneurial financing. We demonstrate a tension between the entrepreneur's motivation for effort and the investor's willingness to finance the project. Advice to the entrepreneur exacerbates this tension....

I show that Swan’s (1970) independence result requires a multiplicative interaction between durability and all other quality attributes. Because there is no compelling argument for a multiplicativity in quality, monopolists tend to distort durability, even with constant marginal costs....

The paper provides a tractable, analytical framework to study regulatory risk under optimal incentive regulation. Regulatory risk is captured by uncertainty about the policy variables in the regulator’s objective function: weights attached to profits and costs of public funds. Results are as...

The authors describe a principal-supervisor-agent relationship in which agent and supervisor may collude. To prevent collusion, the principal may contract on a noisy signal which is correlated with the occurrence of collusion. When the signal is informative enough, the principal uses it and no...

This paper investigates how additional ex post private information by the agent affects the equilibrium outcome of the monopolistic screening model. In general, the principal always weakly benefits when the agent receives additional private information after the contracting stage. Instead, both...

We analyze the two goals behind the European Bologna Process of increasing student mobility: enabling graduates to develop multi cultural skills and increasing the quality of universities. We isolate three effects: 1) a competition effect that raises quality; 2) a free rider effect that lowers...

This paper explains why a principal may demand too much paperwork from a subordinate: Due to limited liability and moral hazard a principal is unable to appropriate all rents. Internal paperwork allows a more accurate monitoring of the agent and enables the principal to appropriate a larger part...

In an agency model this paper studies the strategic effect of a difference in timing of verification. A principal may choose between two equally efficient verification procedures: monitoring and auditing. Under auditing the principal receives additional information. Due to a double moral hazard...