A firm whose profits increase when outsiders believe that it pays high wages may induce its workers to over-consume goods that signal high compensation. One implication is that firms may lobby government to subsidize fringe benefits with high signaling value, such as company cars, to their...

Given that it is difficult to monitor, and even more so to enforce, International Environmental Agreements, it is surprising that they are signed and implemented. This paper offers a theoretical model, which addresses the phenomena. The focus is on informational and coordination problems--a...

A policy is often more effective the more confident are economic agents that the current leader (or principal) will adopt the policy. This paper considers uncertainty about the principal's type, interpreted as uncertainty about the probability that he would adopt a project or policy. We show how...

A firm may induce voters or elected politicians to support a policy it favors by suggesting that it is more likely to invest in a district whose voters or representatives support the policy. In equilibrium, no one vote may be decisive, and the policy may gain strong support though the majority...