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Full-Text Articles in Political Economy
Grading Standards And Education Quality, Raphael Boleslavsky, Christopher Cotton
Grading Standards And Education Quality, Raphael Boleslavsky, Christopher Cotton
Raphael Boleslavsky
We consider a game in which schools compete to place graduates by investing in education quality and by choosing grading policies. In equilibrium, schools strategically adopt grading policies that do not perfectly reveal graduate ability to evaluators (including employers and graduate schools). We compare equilibrium outcomes when schools grade strategically to equilibrium outcomes when evaluators perfectly observe graduate ability. With strategic grading, grades are less informative, and evaluators rely less on grades and more on a school's quality when assessing graduates. Consequently, under strategic grading, schools have greater incentive to invest in quality, and this can improve evaluator welfare.
Progressive Screening: Long Term Contracting With A Privately Known Stochastic Process, Raphael Boleslavsky, Maher Said
Progressive Screening: Long Term Contracting With A Privately Known Stochastic Process, Raphael Boleslavsky, Maher Said
Raphael Boleslavsky
We examine a model of long-term contracting in which the buyer is privately informed about the stochastic process by which her value for a good evolves. In addition, the realized values are also private information. We characterize a class of environments in which the profit-maximizing long-term contract offered by a monopolist takes an especially simple structure: we derive sufficient conditions on primitives under which the optimal contract consists of a menu of deterministic sequences of static contracts. Within each sequence, higher realized values lead to greater quantity provision; however, an increasing proportion of buyer types are excluded over time, eventually …
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 …