Digital Commons Network^™

This paper studies the use of information for incentives and risk sharing in agency problems. When the principal is risk neutral or the outcome is contractible, risk sharing is unnecessary or dealt with by a contract on the outcome. In this case, information systems are ranked only according to their informativeness about the agent's action. When the outcome is noncontractible, however, the principal has to rely on imperfect information not only for incentives, but also for risk sharing. Under the first-order approach, this paper characterizes a problem-independent ranking of information systems, relaxing Gjesdal's (1982) criterion. We also find sufficient conditions …

We consider the role of integrated assessment models (IAMs) in estimating the social cost of carbon (SCC) for U.S. regulatory purposes. Our approach is rooted in the needs of U.S. institutions responsible for making and implementing climate policy, specifically regulatory agencies within the Executive Branch and Congress should it choose to take up climate legislation. We argue, first, that policy makers need a numerical value for the SCC for policy evaluation and implementation. This cannot be done credibly without sophisticated computer models that incorporate climate and economic considerations, that is, without IAMs. Second, whatever the true value of the SCC …

The Michigan property tax system gives rise to wide variation in taxable basis across comparable homes due to the application of acquisition-value based assessment limits. Exploiting the fact that the resulting differences in property tax liability are temporarily inherited by new homebuyers, I estimate the degree of capitalization of these largely-idiosyncratic tax differences in a setting free of many of the econometric problems that typically plague estimation of property tax capitalization in order to evaluate whether homebuyers understand the tax implications of their home purchases. Consistent with anecdotal evidence, I find that homebuyers are woefully inattentive to the temporary nature …

We analyze different committee designs in a model with the endogenous participation of experts who have private information about their own abilities. Each committee design involves a test of abilities whose accuracy influences experts’ decisions to participate. We derive the following findings. First, higher wages lead to lower quality experts. Second, an increase in transparency improves the quality of experts on the committee. Third, larger committees attract less able experts than smaller ones, unless the committee operates under full transparency. Fourth, we derive the properties of optimal committees. They involve low wages and can be transparent or opaque.