We study a controlled corporate experiment in which loan officers was altered from fixed salary to volume-based pay. The incentives increased aggressiveness of origination: higher origination rates (+31%), loan sizes (+15%), and default rate (+28%). The effects are partly driven by moral hazard: approval decision is driven by loan officers’ discretion; however, default is uncorrelated with disc...

Throughout the criminal justice system, prosecutors have wide discretion to exercise their authority in determining what crimes should be prosecuted. This discretion has historic support through both constitutional separation of powers doctrines and public policy. This discretion is based on a variety of factors, including the severity of the crime, the extent of the evidence, prosecutorial res...

The United States Sentencing Commission was created to develop federal sentencing guidelines, which restrict judicial discretion and were found to increase the average sentence length while leaving unchanged the likelihood of resolution through plea bargaining. A game theoretic model is developed in which a sentencing commission may impose guidelines or defer to judicial discretion; then a defe...