Working papers results

We analyze the effort allocation choices of incumbent politicians when voters are uncertain about politician preferences. There is a pervasive incentive to "posture" by overproviding effort to pursue divisive policies, even if all voters would strictly prefer to have a consensus policy implemented. As such, the desire of politicians to convince voters that their preferences are aligned with the majority of the electorate can lead them to choose strictly pareto dominated effort allocations. Transparency over the politicians' effort choices can either mitigate or re-enforce the distortions depending on the strength of politicians' office motivation and the capacity for the holder of the office in question to effect change. When re-election concerns are paramount transparency about effort choices can be bad for both incentivizing politicians to exert effort on socially efficient tasks and for allowing voters to select congruent politicians. We take our theoretical results to the data with an empirical analysis o f how U.S. Congressmen allocate time across issues. Consistent with the theory, we find evidence of political posturing due to elections (among U.S. Senators) and due to higher transparency (among U.S. House Members).

This paper applies mechanism design to the study of international conflict resolution. Standard mechanisms in which an arbitrator can enforce her decisions are usually not feasible because disputants are sovereign entities. Nevertheless, we find that this limitation is inconsequential. Despite only being capable of making unenforceable recommendations, mediators can be equally effective as arbitrators. By using recommendation strategies that do not reveal that one player is weak to a strong opponent, a mediator can effectively circumvent the unenforceability constraint. This is because these strategies make the strong player agree to recommendations that yield the same payoff as arbitration in expectation. This result relies on the capability of mediators to collect confidential information from the disputants, before making their recommendations. Simple protocols of unmediated communication cannot achieve the same level of ex ante welfare, as they preclude confidentiality.

Existant studies of conflict, negotiation and international relations do not take into account that the institutions used to resolve disputes shape the incentives for entering disputes in the first place. Because engagement in a costly and destructive war is the 'punishment' for entering a dispute, institutions that reduce the chances that a dispute lead to open conflict may make more disputes emerge and incentivize militarization. We provide a simple model in which the support for unmediated peace talks, while effective in improving the chance of peace for a given distribution of military strength, ultimately leads to the emergence of more disputes and to higher conflict outbreak. Happily, we find that not all conflict resolution institutions suffer from these, apparently paradoxical, but actually quite intuitive drawbacks. We identify a form of third-party intervention inspired by the celebrated work by Myerson, and show that it can broker peace in emerged disputes effectively and also avoid perverse militarization incentives.

Frustration, anger, and blame have important consequences for economic and social behavior, concerning for example monopoly pricing, contracting, bargaining, violence, and politics. Drawing on insights from psychology, we develop a formal approach to exploring how frustration and anger, via blame and aggression, shape interaction and outcomes in strategic settings.

We develop, and experimentally test, models of informal agreements. Agents are assumed to be honest but suffer costs of overcoming temptations. We extend two classical bargaining solutions -split-the-difference and deal-me-out -to this informal agreement setting. For each solution there are two natural ways to do this, leaving us with 2x2 models to explore. In the experiment, a temptations-constrained version of deal-me-out emerges as the clear winner.

Understanding the dynamics of the leverage ratio is at the heart of the empirical research about firms' capital structure, as they can be very different under alternative theoretical models. The pillars of almost all empirical applications are the maintained assumptions of poolability and stationarity, which are motivated by the need of model's simplicity and treatability, rather than being based on an empirical ground. In this paper we provide robust evidence of non-stationarity for a significantly large share of US firms' debt ratios and of strong heterogeneity in the speeds at which firms adjust towards their targets. These results stimulate new directions of the empirical research on debt ratio dynamics by relying more on the concept of heterogeneous degree of leverage persistence.

A common explanation for African current underdevelopment is the extractive character of institutions established during the colonial period. Yet, since colonial extraction is hard to quantify, its precise mecha- nisms and magnitude are still unclear. In this paper, I tackle these issues by focusing on colonial trade in French Africa. By using new data on export prices, I show that the colonizers used trade monopsonies and coercive labor institutions to reduce prices to African agricultural producers way below world market prices. As a consequence, during the colonial period, extractive institutions cut African gains from trade by at least one-half.

Motivated by dynamic asset pricing, we extend the dual pairs'theory of Dieudonne'(1942) and Mackey (1945) to pairs of modules over a Dedekind complete f-algebra with multiplicative unit. The main tools are:

a Hahn-Banach Theorem for modules of this kind;

a topology on the f-algebra that has the special feature of coinciding with the norm topology when the algebra is a Banach algebra and with the strong order topology of Filipovic, Kupper, and Vogelpoth (2009), when the algebra of all random variables on a probability space is considered.

As a leading example, we study in some detail the duality of conditional Lp-spaces.

How can laboratory experiments help us understand banking crises, including the usefulness of various policy responses? After giving a concise introduction to the field of experimental economics more generally, I attempt to provide answers. I discuss methodological issues and survey relevant work that has been done.

Because journals favor clear stories researchers' may gain by engaging in scientific misconduct, ranging from shady practices like running more sessions hoping for significance to outright data fabrication. To set researchers' incentives straight, we propose sealed-envelope submissions, where editors' and referees' evaluations are based only on the interest of the research question and on the proposed empirical method.