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Full-Text Articles in Political Economy
Evolving Influence: Resolving Extreme Conflicts Of Interest In Advisory Relationships, Raphael Boleslavsky, Tracy Lewis
Evolving Influence: Resolving Extreme Conflicts Of Interest In Advisory Relationships, Raphael Boleslavsky, Tracy Lewis
Raphael Boleslavsky
An advocate for a special interest provides advice to an uninformed planner for her to consider in making a sequence of decisions. Although the advocate may have valuable information for the planner, it is also known that the advocate is interested only in advancing his cause and will distort his advice in order to influence the planner's decision. Each time she repeats the problem, however, the planner learns about the accuracy of the advocate's recommendation, mitigating some of the advocate's incentive to act in a self-serving manner. We propose a theory to explain why planners do sometimes rely on information …
Dynamic Regulation Design Without Payments: The Importance Of Timing, Raphael Boleslavsky, David L. Kelly
Dynamic Regulation Design Without Payments: The Importance Of Timing, Raphael Boleslavsky, David L. Kelly
Raphael Boleslavsky
We consider a two period model of optimal regulation of a firm subject to marginal compliance cost shocks. The regulator faces an asymmetric information problem: the firm knows current compliance costs, but the regulator does not. Both the regulator and the firm are uncertain about future costs. In our basic framework, the regulator may not offer payments to the firm; we show that the regulator can vary the strength of regulation over time to induce the firm to reveal its costs and increase welfare. In the optimal mechanism, the regulator offers stronger (weaker) regulation in the first period and weaker …