consistent voting rules for competitive local public goods economies abstract we establish the existence of a voting market equilibrium for a large class of local public goods economies where faced with prices of the private goods and with the public goods produced by the local governments each firm maximizes its profits and each individual maximizes his utility subject to his budget constraint in addition each local government taking the prices of private goods as given i has a balanced budget and ii chooses its production of public goods in such a way that no group that contains more than q q 1 of its residents where q denotes the number of public goods produced will unanimously prefer another affordable vector of public goods

disentangling the college wage premium estimating a model with endogenous education choices this article proposes and empirically implements a structural model of education choices and wage determination to quantitatively evaluate the contributions of productivity enhancement and ability signaling in the college wage premium the model is estimated under various distributional parameterizations using 1990 u s census 5 public use micro sample under these parameterizations i find that college education enhances attendees productivity by about 40 and productivity enhancement accounts for close to two thirds of the college wage premium

endogenous inequality in integrated labor markets with two sided search we consider a market with red and green workers where labels are payoff irrelevant workers may acquire skills skilled workers search for vacancies while firms search for workers a unique symmetric equilibrium exists in which color is irrelevant there are also asymmetric equilibria in which firms search only for green workers more green than red workers acquire skills skilled green workers receive higher wages and the unemployment rate is higher among skilled red workers discrimination between ex ante identical individuals arises in equilibrium and yet firms have perfect information about their workers and strictly prefer to hire minority workers

a social coalitional equilibrium existence lemma the purpose of this paper is to construct an abstract model of a society in which each member can cooperate with others by forming a coalition but at the same time can be influenced by the members outside the coalition a new concept of equilibrium called here a social coalitional equilibrium is proposed and a sufficient condition for its existence provided the social coalitional equilibrium may be considered a synthesis of the nash equilibrium a noncooperative solution concept and the core a cooperative solution concept the paper provides a broadly applicable mathematical tool for proving existence of equilibrium for models of labor managed market economies the purpose of the present paper is to construct an abstract model of a society in which each member can cooperate with others by forming a coalition but at the same time can be influenced by the members outside the coalition a new concept of equilibrium called here a social coalitional equilibrium is proposed and a sufficient condition for its existence provided a coalition structure is endogenously determined in equilibrium when the model is suitably specified it describes noncooperative behavior of the members and the social coalitional equilibrium is reduced to the nash equilibrium given another extreme specification the model is reduced to a cooperative game without sidepayments in characteristic function form and the set of social coalitional equilibria corresponds precisely to the core the need for study of the present model arose originally out of the author s recent investigation of labor managed market economies both the socialistic version and the capitalistic version in 10 11 12 indeed the model and the concept of social coalitional equilibrium were obtained by abstracting and generalizing the formal aspect of those studies the socialistic labor managed market economy has long been the object of study of various authors see e g vanek 19 the capitalistic labor managed market economy seems to reflect the institutional aspect of the modern capitalistic society better than the economies formulated by other available general equilibrium models it differs for example from the standard private ownership economy of arrow and debreu 1 see also debreu 6 sec 5 5 in that i the ownership and control of a firm are separated ii no particular firm is given a priori but instead the list of potential firms is given as a primitive datum and iii the behavioral principle of the economic agents involves both noncooperative behavior and cooperative behavior because of the above feature ii any general equilibrium model of this economy has to formulate the economic mechanism that underlies the formation of firms in equilibrium as

strike three discrimination incentives and evaluation major league baseball umpires express their racial ethnic preferences when they evaluate pitchers strikes are called less often if the umpire and pitcher do not match race ethnicity but mainly where there is little scrutiny of umpires pitchers understand the incentives and throw pitches that allow umpires less subjective judgment e g fastballs over home plate when they anticipate bias these direct and indirect effects bias performance measures of minorities downward the results suggest how discrimination alters discriminated groups behavior generally they imply that biases in measured productivity must be accounted for in generating measures of wage discrimination

a theory of optimal random crackdowns police often engage in crackdowns on crime which are intermittent periods of high inten sity policing this paper develops a theoretical framework for modeling police monitoring behavior and individuals decisions to engage in crime within this framework we show that there are situations where it will be optimal for a crime minimizing police agency to engage in random crackdowns when they occur crackdowns also provide a way of estimating the deterrence effect of policing we illustrate the application of the model in analyzing a speed

search profiling with partial knowledge of deterrence consider the choice of a profiling policy where decisions to search for evidence of crime may vary with observable covariates of the persons at risk of search i pose a planning problem whose objective is to minimise the social cost of crime and search the consequences of a search rule depend on the extent to which search deters crime i study the planning problem when the planner has partial knowledge of deterrence i show how the planner can eliminate dominated search rules and how he can use the minimax or minimax regret criterion to choose an undominated rule

subjective performance and the value of blind evaluation we investigate the incentive and project screening effects of anonymity in a setting of subjective performance evaluation if the review process is blind then the applicant s payoff relevant type is hidden from the reviewer if the process is nonblind or informed then the reviewer observes the applicant s type directly in either case the evaluator receives a noisy signal on the quality of the agent s project and decides whether to accept or reject it we find that if the signal is not verifiable then informed evaluation results in an excessively steep equilibrium acceptance policy the standard applied to low ability applicants is too stringent and the standard applied to high ability applicants is too lenient blind review in which all applicants face the same standard often provides better incentives but it discards valuable information for screening projects we discover that blind review is more likely to be preferred by the evaluator when 1 the applicant pool is skewed toward high ability types 2 the stakes from acceptance are relatively high for applicants 3 both types of errors are relatively less costly or 4 there is little competition among reviewers we also discover that under blind review the evaluator may benefit from a more diverse applicant pool

crime punishment and prejudice abstract we examine the link between the penalties used to punish convicted criminals and judicial prejudice against defendants in our model agents choose to commit crimes if their privately observed utility from doing so is high enough a crime generates noisy evidence and defendants are convicted when the realized amount of evidence is sufficiently strong to establish the probability of guilt beyond a fixed threshold we show that if convicted offenders are incarcerated poorer individuals face a strong prior prejudice in trials and are therefore convicted with less evidence than richer individuals at the same time they commit crimes more frequently penalties such as monetary fines can eliminate this bias but may also reverse it we fully characterize the penalty schedule that guarantees an unbiased equilbrium we extend the model such that agents also differ in characteristics such as race or gender we show biased outcomes targeted at subgroups of the population may still exist even if all members of the population are ex ante alike in their economic characteristics

using electoral cycles in police hiring to estimate the effect of police on crime comment previous empirical studies have uncovered little evidence that police reduce crime possibly due to simultaneity problems this paper uses the timing of mayoral and gubernatorial elections as an instrumental variable to identify a causal effect of police on crime increases in the size of police forces are shown to be disproportionately concentrated in mayoral and gubernatorial election years increases in police are shown to substantially reduce violent crime but have a smaller impact on property crime the null hypothesis that the marginal social benefit of reduced crime equals the costs of hiring additional police cannot be rejected

noncooperative bargaining hostages and optimal asset ownership this paper re examines the effect of asset ownership on investment decisions for a joint relationship in the absence of contracts on investment levels it obtains some results which contradict findings by sanford j grossman oliver d hart and john moore in particular it finds that the loss of ownership of an asset may increase the asset loser s investment incentive the difference between this paper and those authors papers stems from the different interpretations of the roles of the threat point and outside options in bargaining this paper also clarifies the role of relationship specific investments as a cause of integration copyright 1998 by american economic association

aggregation and social choice a mean voter theorem a celebrated result of black 1948a demonstrates the existence of a simple majority winner when preferences are single peaked the social choice follows the preferences of the median voter the median voter s most preferred outcome beats any alternative however this conclusion does not extend to elections in which candidates differ in more than one dimension this paper provides a multi dimensional analog of the median voter result we provide conditions under which the mean voter s most preferred outcome is unbeatable according to a 64 majority rule the conditions supporting this result represent a significant generalization of caplin and nalebuff 1988 the proof of our mean voter result uses a mathematical aggregation theorem due to prekopa 1971 1973 and borell 1975 this theorem has broad applications in economics an application to the distribution of income is described at the end of this paper results on imperfect competition are presented in the companion paper caplin and nalebuff 1991

speeding terrorism and teaching to the test educators worry that high stakes testing will induce teachers and their students to focus only on the test and ignore other untested aspects of knowledge some counter that although this may be true knowing something is better than knowing nothing and many students would benefit even by learning the material that is to be tested using the metaphor of deterring drivers from speeding it is shown that the optimal rules for high stakes testing depend on the costs of learning and of monitoring incentives need to be concentrated for those whose costs of action are high

some comments on majority rule equilibria in local public good economies abstract this paper examines some of the main assumptions and results of the literature on majority rule equilibrium in local public good economies it is shown that the usual assumption that the ordering of agents mrss between the private and public good is a continuous monotone function of income and independent of the other economic variables is not necessary for an mre to exist in addition it is shown that in economies with home ownership stratification of agents by income or preferences need not occur in equilibrium

cooperative investments and the value of contracting recent articles have shown that contracts can support the efficient outcome for bilateral trade even in the face of specific investments and incomplete contracting these studies typically considered selfish investments that benefit the investor e g the seller s investment reduces her production costs the authors find very different results for cooperative investments that directly benefit the investor s partner e g the seller s investment improves the buyer s value of the good most importantly if committing not to renegotiate the contract is impossible then contracting has no value i e the parties cannot do better than to abandon contracting altogether in favor of ex post negotiation

passenger profiling imperfect screening and airport security we present a theoretical model of airport searches the model extends previous work in the area in that detection conditional on search is imperfect the hit rates tests for racial bias developed in knowles persico and todd 2001 is shown to apply even in the presence of imperfections in monitoring we then study two channels for improving airport security better targeting and better detection we show that better targeting does not necessarily decrease the overall crime rate although it will decrease crime in the group that is targeted improved detection rates unambiguously decrease crime group speci c improvements in detection do not necessarily increase the number of searches for those groups the analysis is extended to allow for the possibility that criminal passengers disguise themselves as members of low crime groups

voting with ballots and feet existence of equilibrium in a local public good economy abstract this paper proves a general existence theorem for equilibrium in a local public good economy with free mobility by extending greenberg and shitovitz s j econ theory46 1988 223 236 approach each jurisdiction s collective choice rule is the d majority voting rule proposed by greenberg econometrica47 1979 627 636 spillover effects of local public goods externalities due to the population distribution and snob effects are all allowed we need transitivity and completeness of preferences these assumptions are not used by greenberg and shitovitz because they do not permit consumers to move free mobility of consumers causes disconnections in consumption sets a problem addressed here journal of economic literatureclassification numbers c62 d72 h72 r13

optimal auditing with scoring theory and application to insurance fraud this article makes a bridge between the theory of optimal auditing and the scoring methodology in an asymmetric information setting our application is meant for insurance claims fraud but it can be applied to many other activities that use the scoring approach fraud signals are classified based on the degree to which they reveal an increasing probability of fraud we show that the optimal auditing strategy takes the form of a red flags strategy which consists in referring claims to a special investigative unit siu when certain fraud indicators are observed the auditing policy acts as a deterrence device and we explain why it requires the commitment of the insurer and how it should affect the incentives of siu staffs the characterization of the optimal auditing strategy is robust to some degree of signal manipulation by defrauders as well as to the imperfect information of defrauders about the audit frequency the model is calibrated with data from a large european insurance company we show that it is possible to improve our results by separating different groups of insureds with different moral costs of fraud finally our results indicate how the deterrence effect of the audit scheme can be taken into account and how it affects the optimal auditing strategy

power in a theory of the firm transactions take place in the firm rather than in the market because the firm offers power to agents who make specific investments past literature emphasizes the allocation of ownership as the primary mechanism by which the firm does this within the contractibility assumptions of this literature we identify a potentially superior mechanism the regulation of access to critical resources access can be better than ownership because i the power agents get from access is more contingent on their making the right investment and ii ownership has adverse effects on the incentive to specialize the theory explains the importance of internal organization and third party ownership

contractual incompleteness and the optimality of equity joint ventures firms engaged in the pooling of complementary skills often choose the equity joint venture ejv over alternative profit sharing arrangements this paper addresses the issue of how equity shares are different from profit shares it is shown that in settings of contractual incompleteness marketable equity ownership when compared to non transferable profit sharing contracts provides better ex ante incentives to the parties involved by mitigating ex post hold up problems among other things the prevalence of the 51 49 or 50 50 ejv in which one party has 51 percent or 50 percent equity shares is explained

local public goods with mobility existence and optimality of a general equilibrium abstract the existence and optimality of a general equilibrium in a model with a finite number of locations among which the continuum of individuals each individual belonging to one of a finite number of types have to choose is investigated each community finances its own production of public goods by taxes the way in which the tax burden in shared among the different types in the different regions is left arbitrary the model allows for restrictions on the mobility of either residents and or workers congestion and externalities in both production and consumption commuting costs preferences of an individual may also depend on his location as well as on the distribution of all individuals across locations

an alternative test of racial prejudice in motor vehicle searches theory and evidence we propose a simple model of trooper behavior to design empirical tests for whether troopers of different races are monolithic in their search behavior and whether they exhibit relative racial prejudice in motor vehicle searches our test of relative racial prejudice provides a partial solution to the well known infra marginality and omitted variables problems associated with outcome tests when applied to a unique data set from florida our tests soundly reject the hypothesis that troopers of different races are monolithic in their search behavior but fail to reject the hypothesis that troopers of different races do not exhibit relative racial prejudice

will affirmative action policies eliminate negative stereotypes a key question concerning affirmative action is whether the labor market gains it brings to minorities can continue without it becoming a permanent fixture in the labor market the authors argue that this depends on how the policy affects employers beliefs about the productivity of minority workers they study the joint determination of employer beliefs and worker productivity in a model of statistical discrimination in job assignments the authors prove that even when identifiable groups are equally endowed ex ante affirmative action can bring about a situation in which employers correctly perceive the groups to be unequally productive ex post copyright 1993 by american economic association

weakly democratic regular tax equilibria in a local public goods economy with perfect consumer mobility in this paper we study the existence of equilibria in a local public goods economy which has the following structure there are a finite number of geographical regions each region has a government which provides public goods locally by buying private goods inputs on competitive markets and transforming these inputs into outputs of public goods by using a convex technology the local public goods are pure in the sense that all the local residents consume the total produced with no spillovers to other regions each regional government raises revenue from the residents of its region to cover the costs of the public goods it provides the local governments are assumed to be weakly democratic in the sense that no public sector proposal that is a vector of public good provisions and a tax scheme to pay for it will be enacted for which there exists an alternative proposal which is unanimously preferred by the local residents note that it is not being assumed that unanimity is a necessary condition for a public sector proposal to be enacted private goods are produced by price taking profit maximizing producers using convex technologies and are traded across regions a continuum of price taking utility maximizing consumers who are perfectly mobile across regions treat parametrically the public sector proposals of the various local governments in deciding where to live there are a finite number of different types of consumers with type defined by a consumer s preferences initial endowments and share of private sector profits a feasible allocation is a specification of a partition of the consumers among the regions a vector of technically feasible public good provisions and an associated vector of private good inputs used in its production for

a general characterization of optimal income tax enforcement this paper develops a general approach to characterizing optimal income tax and enforcement schemes our analysis clarifies the nature of the interplay between tax rates audit probabilities and penalties for misreporting in particular it is shown that for a variety of objective functions for the principal the optimal tax schedule is in general concave at least weakly and monotonic the marginal tax rates determine the audit probabilities and less harsh penalties lead to higher enforcement costs our results imply that there exists a tradeoff between equity and efficiency considerations in the enforcement context which is similar to that in the moral hazard context for tax policy it is well accepted by now that informational asymmetries generate important constraints on the formulation of economic policy an early and classic example is given by mirrlees 1971 who considers the problem of optimal income taxation when individuals differ in their ability to transform effort into income it is assumed that ability and effort of an individual cannot be observed at any cost whereas income which is the product of these two unobservables is perfectly and costlessly observable taxes can thus depend only on final income under these informational conditions the equity efficiency tradeoffs that constrain the choice of tax policy arise only because of the presence of moral hazard associated with taxation of income if there were no moral hazard i e individual efforts and therefore incomes were exogenous the problem of optimal income taxation would be a trivial one since by assumption individual incomes are perfectly and costlessly observable in much of the recent literature on optimal income taxation in the presence of costly enforcement reinganum and wilde 1985 border and sobel 1987 and others on the other hand individual incomes are treated as exogenous i e there is no moral hazard however informational constraints arise from another important consideration namely an individual s income cannot be directly observed it can only be verified through a costly

revenue sharing and control rights in team production theories and evidence from joint ventures this paper presents a model of the joint venture that is grounded in the stylized facts we found from a sample of 200 joint venture contracts the model incorporates the revenue sharing contract into the incomplete contract frameworks of grossman hart moore property rights theory and the transaction cost theory of the firm and emphasizes the impact of expropriation joint control can be optimal as well as unilateral control our econometric analysis of the revenue sharing and control arrangements offers strong support to our property rights theory motivated model with self investment but rejects that with cooperative investment the transaction cost theory motivated model leaves some important empirical findings unexplained our findings also reject some of the existing theories of joint ownership

disentangling the incentive and entrenchment effects of large shareholdings this article disentangles the incentive and entrenchment effects of large ownership using data for 1 301 publicly traded corporations in eight east asian economies we find that firm value increases with the cash flow ownership of the largest shareholder consistent with a positive incentive effect but firm value falls when the control rights of the largest shareholder exceed its cash flow ownership consistent with an entrenchment effect given that concentrated corporate ownership is predominant in most countries these findings have relevance for corporate governance across the world

foreign direct investment and international trade in a continuum ricardian trade model abstract we develop a continuum ricardian trade model to capture both north south trade and technology transfer via foreign direct investment fdi by multinational enterprises mnes we show that there is a unique range of products produced in the south by mnes in the case of an infinitely elastic supply of expatriates if the ability of southern workers in absorbing northern technology increases then a the range of mne production increases b northern workers s welfare and southern workers welfare change in opposite directions and c the world aggregate welfare increases under certain conditions we explore issues such as north south wage gaps fdi policies and the product cycle we also derive results under a general supply of expatriates

investor protection and corporate governance recent research has documented large differences among countries in ownership concentration in publicly traded firms in the breadth and depth of capital markets in dividend policies and in the access of firms to external finance a common element to the explanations of these differences is how well investors both shareholders and creditors are protected by law from expropriation by the managers and controlling shareholders of firms we describe the differences in laws and the effectiveness of their enforcement across countries discuss the possible origins of these differences summarize their consequences and assess potential strategies of corporate governance reform we argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank centered and market centered financial systems

racial profiling fairness and effectiveness of policing citizens of two groups may engage in crime depending on their legal earning opportunities and on the probability of being audited police audit citizens police behavior is fair if both groups are policed with the same intensity we provide exact conditions under which forcing the police to behave more fairly reduces the total amount of crime these conditions are expressed as constraints on the quantile quantile plot of the distributions of legal earning opportunities in the two groups we also investigate the definition of fairness when the cost of being searched reflects the stigma of being singled out by police

does asset ownership always motivate managers outside options and the property rights theory of the firm this paper studies the grossman hart moore ghm property rights approach to the theory of the firm under alternating offers bargaining when managers can pursue other occupations while negotiating over the division of the gains from cooperation the ghm results obtain if taking the best alternative job terminates bargaining outcomes are very different sometimes an agent with an important investment decision should not own the assets he works with sometimes independent assets should be owned together sometimes strictly complementary assets should be owned separately

competition among institutions abstract economic theory offers two different approaches to the analysis of group formation and the role of institutions general equilibrium approach explores the influence of the economic environment on formation of coalitions game theory explores the influence of institutional rules on equilibrium outcomes we introduce an integrative approach an institution s policy depends on its membership while its membership depends on the policies of all the institutions we present three distinct mathematical approaches to these models highlighting the algebraic nature of the question of existence of equilibrium our apparatus cover many economic and political environments including cases with multiple dimensions and multiple institutions journal of economic literature classification numbers c62 d50 d71 d72 h11 h40 r13 r53

a critique of tiebout s theory of local public expenditures the last section of this paper presents a rigorous version of tiebout s theory of local public goods it is shown that equilibria exist and are pareto optimal this rigorous theory follows closely the more rigorous part of tiebout s work this rigorous theory makes a number of very special assumptions which make local public goods essentially private the body of this paper presents a series of examples which show that if one tries to generalize the rigorous version of tiebout s theory in a number of interesting directions then equilibria may no longer exist or may not be pareto optimal the conclusion is that tiebout s idea does not lead to a satisfactory general theory of local public goods the goal of this paper is to point out that tiebout s notion of equilibrium with local governments does not have the nice properties of general competitive equilibrium except under very restrictive assumptions tiebout 39 suggested that there are competitive forces which tend to make local governments allocate resources in a pareto optimal fashion consumers choose to live in those towns with the mix of taxes and public goods they prefer local governments choose this mix so as to attract inhabitants this idea may seem intriguing for it suggests that the invisible hand solves an important part of samuelson s perplexing public goods problem 32 tiebout in fact makes an argument which is nearly rigorous i give a rigorous version of his argument at the end of the paper however in this rigorous version so many restrictive assumptions are made that public goods become essentially private in the body of the paper i give a series of examples with which i try to convince the reader that one is forced to adopt tiebout s restrictive assumptions the idea is that if one changes any of his assumptions then either equilibria may not exist or may not be pareto optimal my examples are presented in the context of a general class of tiebout models i consider several subclasses one of which is the special case considered by tiebout in each of the subclasses except that considered by tiebout i give a counterexample either to the existence of equilibrium or to its pareto optimality the subclasses are so chosen that the difficulties they reveal would be shared by any reasonable tiebout model which differed from his special case i believe that my examples controvert tiebout s suggestion 39 last paragraph that his theory compares favorably with competitive equilibrium theory most of the examples in this paper have already appeared in the literature i cite related work as i go along what is new here is that i assemble the examples in a unified argument

contracting institutions and ownership structure in international joint ventures abstract this paper examines the role of contracting institutions on a multinational firm s optimal ownership strategy we develop a model in which both a multinational firm and its local joint venture partner can ex post engage in costly rent seeking actions to increase their ex ante agreed upon revenue share we show that the host country s level of contract enforcement and level of judicial favoritism affect the parties incentives to contribute to the international joint venture the model allows us to identify testable hypotheses relating these institutional features with the performance and optimal ownership structure of international joint ventures

the mirrlees approach to mechanism design with renegotiation with applications to hold up and risk sharing the paper studies the implementation problem first analyzed by maskin and moore 1999 in which two agents observe an unverifiable state of nature and may renegotiate inefficient outcomes following play of the mechanism we develop a first order approach to characterizing the set of implementable utility mappings in this problem paralleling mirrlees s 1971 first order analysis of standard mechanism design problems we use this characterization to study optimal contracting in hold up and risk sharing models in particular we examine when the contracting parties can optimally restrict attention to simple contracts such as noncontingent contracts and option contracts where only one agent sends a message

optimal search profiling with linear deterrence i examine here an aspect of law enforcement that has recently been the subject of debate this is the choice of a profiling policy wherein decisions to search for evidence of crime may vary with observable covariates of the persons at risk of being searched policies that make search rates vary with personal attributes are variously defended as essential to effective law enforcement and denounced as unfair to classes of persons subjected to relatively high search rates variation of search rates by race has been particularly controversial see e g john knowles et al 2001 nicola persico 2002 jeff dominitz 2003 whereas recent research on profiling has sought to define and detect racial discrimination my concern is to understand how a social planner might choose a profiling policy this paper studies optimal profiling in a simple illustrative setting in related work manski 2004 i consider how a planner might reasonably behave when he does not possess all of the information needed to determine an optimal policy section i poses a utilitarian planning problem whose objective is to minimize the social cost of crime and search search is costly per se and search that reveals a crime entails costs for punishment of offenders search is beneficial to the extent that it deters or prevents crime deterrence is expressed through the offense function which describes how the offense rate of persons with given covariates varies with the search rate applied to these persons prevention occurs when search prevents an offense from causing social harm section ii derives the optimal profiling policy in the tractable case where search deters crime linearly one might think that search should focus on the most crime prone segments of the population however this is not necessarily the case if persons differ in the extent to which search deters crime it may be optimal to search a less crime prone group and not to search a more crime prone group if members of the former group are deterrable and those in the latter group are not sections i and ii consider ex ante search which apprehends offenders before their offenses cause social harm section iii performs parallel analysis for ex post search which apprehends offenders after completion of their offenses whereas ex ante search both deters and prevents crime ex post search only deters the two types of search have different implications for profiling policy although detection of discrimination is not my direct concern the findings reported here do have implications for that inferential problem the models studied in knowles et al 2001 and persico 2002 imply that in the absence of discrimination optimal profiling must equalize the offense rates of persons with different covariates provided that such persons are searched at all the present model differs from theirs and it does not produce their conclusion perhaps the most important difference is in the objective functions assumed for the agencies that make profiling policy they assume that police on the street aim to maximize the probability of successful searches minus the cost of performing searches i assume that a planner wants to minimize a social cost function with three components a the harm caused by completed offenses b the cost of punishing offenders who are apprehended and c the cost of performing searches

affirmative action in a competitive economy abstract we consider a model of endogenous human capital formation with competitively determined wages discrimination is sustainable in equilibrium in the presence of two distinguishable but ex ante identical groups of workers an affirmative action policy consisting of a quota may fail in the sense that there still may be equilibria where groups are treated differently however the incentives to invest for agents in the discriminated group are improved by affirmative action if the initial equilibrium is the most discriminatory equilibrium in the model without the policy the welfare effects are ambiguous it is possible that the policy makes the intended beneficiaries worse off even if the starting point is the most discriminatory equilibrium the expected payoff may decrease for all agents in the target group

existence of voting market equilibria abstract we show the existence of an equilibrium in a model where private goods are allocated by markets and the public good bad is allocated by majority rule voting

a theory of debt and equity diversity of securities and manager shareholder congruence this paper shows how the optimal financial structure of a firm complements incentive schemes to discipline managers and how the securities return streams determine the claim holders incentives to intervene in management the theory rationalizes 1 the multipucity of securities 2 the observed correlation between return streams and control rights of securities and 3 the partial congruence between managerial and equity holder preferences over policy choices and monetary rewards as well as the low level of interference of equity in management the theory also offers new prospects for a reappraisal of the earlier corporate finance literature