This paper explores the effects of monitoring in contracts between an exporting firm and small agricultural producers in Madagascar. Building on a theoretical framework that incorporates both adverse selection and moral hazard, I test for the effect of monitoring of the agents by the principal on productivity, all the while including an estimate of agent-specific technical inefficiency in the r...

Optimal Use of Labor Market Policies: The Role of Job Search Assistance This paper studies the role of job search assistance programs in optimal welfare-to-work programs. The analysis is based on a framework, that allows for endogenous choice of benefit types and levels, wage taxes or subsidies, and activation measures such as monitoring and job search assistance for each period of unemployment...

We augment existing studies of spot procurement contracts by introducing relational contracting. We first show that at intermediate interest rates, the form of procurement contract affects the parties’ reneging temptation on a given relational contract, and hence affects the best relational contract that is sustainable. We also show that relational contracts make contracts less complete and com...

This paper studies markets plagued with asymmetric information on the quality of the goods traded. In Akerlof’s setting, sellers are better informed than buyers. In contrast, we examine cases where buyers are better informed than sellers. This creates an inverse adverse-selection problem: The market tends to disappear from the bottom rather than from the top. In contrast to the traditional mode...

A model of political contribution of dynamic common agency where state-contingent agreements must be self-enforced is considered. Two issues are mainly examined; punishment strategy on deviation and the limit and scope of implicit agreements. The punishment strategy on the principals takes a form of two-phase scheme in general and, more specifically, it is either an “Exclusion-type”, on which t...

The “spanning condition”describes a situation where the agent’s e¤ort determines the weights placed on two distinct technologies. Su¢ cient conditions are known under which the …rst-order approach (FOA) is valid when the spanning condition holds. In this paper, a complete solution to the problem is provided. Thus, the problem is solved even in cases where the FOA is not valid. The solution has ...

This paper introduces private sender information in a sender-receiver game of Bayesian persuasion with monotonic sender preferences. I derive properties of increasing di¤erences related to the precision of signals and use these to fully characterize the set of equilibria selected by the D1 criterion. The sender’s equilibrium strategy consists of signals which are either separating, i.e., the se...

We consider a moral-hazard problem in a principal-agent relationship. Each party can renege on the signed contract since verification of effort is costly and subject to uncertainty. It is shown that ex-post litigation can restore incentives of the agent. Moreover, when the litigation can be settled by the parties the pure threat of using the legal system may suffice to implement the first-best ...

This paper develops a theory of financial intermediation. Consider an environment with repeated financial interactions in which strategic default is possible. We show that if interactions between any lender and borrower are infrequent and if market participants have incomplete knowledge of the patterns of interactions in the market, then all investments must be intermediated. Moreover, each int...

An entrepreneur contracts with a consultant, who is protected by limited liability, to supply information about the state of a project prior to investing in it. For a given level of investment, a good project succeeds with higher probability than a bad one. The entrepreneur makes an upfront payment that the consultant can either invest in information acquisition (work) or divert for private ben...