When politicians are provided with insufficient incentives by the democratic election mechanism, we show that social welfare can be improved by threshold contracts. A threshold incentive contract stipulates a performance level which a politican must reach in order to have the right to stand for reelection. Read my lips would turn into read my contracts. Reelection thresholds can be offered by p...

Sports leagues constitute one of the few examples of legally operating cartels. In this paper I examine how gate revenue sharing may serve to coordinate talent investments within these cartels. I show that sharing revenues has the potential to raise cartel profits, because it decreases the incentive to invest in playing talent. Leagues consisting of teams with heterogeneous local markets should...

We assess the strength of the different conditions identified in the literature of robust mechanism design. We focus on three conditions: ex post incentive compatibility, robust monotonicity, and robust measurability. Ex post incentive compatibility has been shown to be necessary for any concept of robust implementation, while robust monotonicity and robust measurability have been shown to be n...

The paper examines the role of executive compensation in inducing management behavior that triggers private securities litigation. Incentive pay in the form of options is found to increase the probability of securities class action lawsuits, holding constant a wide range of other firm characteristics. In contrast, base pay levels and share ownership do not have a significant impact on lawsuit i...

Myerson’s [Cooperative games with incomplete information. Int. J. Game Theory 13 (1984) 69– 96] extension of the λ-transfer value to cooperative games with incomplete information focuses among other things on the strength of the incentive constraints at the solution for determining the power of coalitions. We construct an intuitive three-player game where the player whose only contribution is t...

Transparency may be a two‐edged sword in oligopolistic markets where itaffects both the incentive to deviate from a collusive agreement and theseverity of the potential punishment by rival firms. We provide an overviewof theories relating transparency to collusion and competition. This isfollowed by a brief overview of some practical cases to sug...

We study implementation in environments where agents have limited ability to imitate others. Agents are randomly and privately endowed with type-dependent sets of messages. So sending a message becomes a partial proof regarding type. For environments where agents can send any combination of available messages, we develop an Extended Revelation Principle and characterize the incentive constraint...

We apply the theoretical model of endogenous reference-dependence of Ok, Ortoleva and Riella (2011) to the theory of vertical product differentiation. We analyze the standard problem of a monopolist who offers a menu of alternatives to consumers of different types, but we allow for agents to exhibit a form of endogenous reference dependence like the attraction effect. We show that the presence ...

Why is income inequality higher in Latin America than in East Asia? Is this phenomenon related to the region’s natural resource abundance? Is it a contributor to Latin America’s slow and narrowly focused human capital accumulation? If so, can anything be done to reverse the Latin American trends, or should we think of the region’s fate as unalterable? To help answer these questions, this paper ...

Defects in the corporate governance of government-owned enterprises tempt opportunistic officials to breach duties of public stewardship. Corporate-governance theory suggests that incentive-based deferred compensation could intensify the force that common-law duties actually exert on regulatory managers. In principle, a forfeitable fund of deferred compensation could be combined with provisions...