This paper analyzes the effects of two regulatory mechanisms, namely a regulation of the structure of bank CEOs incentive pay and sanctions for the CEOs of failed banks, on bank risk shifting. We extend a standard model of CEO compensation by incorporating leverage and an investment decision. To...

The informativeness principle demonstrates qualitative benefits to increasing signal precision. However, it is difficult to quantify these benefits -- and compare them against the costs of precision -- since we typically cannot solve for the optimal contract and analyze how it changes with...

We introduce two dimensions of uncertainty, about the upside and the downside of an asset, in a model of asset valuation under asymmetric information. The model justifies capital structures with equity and risky debt for information revelation purposes. When investors are more informed about the...

We consider a standard principal-agent setting where the first-order approach to the effort choice problem applies. We decompose the effect of a change in the probability distribution of performances on the form of the optimal contract into three additive components. We also consider the...

Politicians respond to incentives when they decide how to allocate their campaigning time and effort. The literature suggests electoral rules impact politicians' incentives. We argue that the candidate selection process is an equally important source of incentives. We develop a two-stage model...

We analyze the welfare consequences of an increase in the commissions charged by the organizer of an auction. Commissions are similar to taxes imposed on buyers and sellers and the economic problem that results looks similar to the question of tax incidence in consumer economics. We argue,...

Under closed-list proportional representation, a party's electoral list determines the order in which legislative seats are allocated to candidates. When candidates differ in their ability, parties face a trade-off between competence and incentives. Ranking candidates in decreasing order of...

We extend the discussion of redistributive politics across electoral systems to allow for taxation to be distortionary. We allow politicians to choose any tax rate between zero and unity and then redistribute the money collected. We build on the model put forward by Myerson (1993) and Lizzeri...

We analyse how the governance structure of political parties influences electoral competition. Parties choose their organization to manipulate the incentives of politicians to provide effort. We show that intra- and inter-party competition interact to shape these incentives. We also get new...