Current Research

Working Papers

A Dynamic Theory of Regulatory Capture, with Marco A. Schwarz

Firms have incentives to influence regulators' decisions. In a dynamic setting, we show that a firm may prefer to capture regulators through the promise of a lucrative future job opportunity (i.e., the revolving-door channel) than through a hidden payment (i.e., a bribe). This is because the revolving door publicly signals the firm's eagerness and commitment to reward friendly regulators, which facilitates collusive equilibria. Moreover, the revolving-door channel need not require an explicit agreement between the firm and the regulator, but may work implicitly giving rise to an industry norm. This renders ineffective standard anti-corruption practices, such as whistle-blowing protection policies. We highlight that closing the revolving door may give rise to other inefficiencies. Moreover, we show that cooling-off periods may make all players worse off if timed wrongly. Opening the revolving door conditional on the regulator's report may increase social welfare.

Project Choice and Social-Image Concerns, with Claudia Cerrone, Ester Manna, and Theodoros Saroglou

UB WP E-25-484

Employees' desire to impress their employer may lead to suboptimal choices, such as performing tasks that are out of their depth. In this paper, we formalise this intuition in a principal-agent setting and we experimentally analyse its practical relevance. Through a theoretical model, we show that an agent's desire to appear competent to their employer (social image concerns), can result in inefficient project selection. We test this prediction using a laboratory experiment and find that social image concerns increase the likelihood of suboptimal project choices when agents are male and the principal-agent interaction is not anonymous. Our findings have implications for organisational design.

Platform Liability with Reputational Sanctions, with Juanjo Ganuza, Fernando Gómez Pomar, Ester Manna, and Adrian Segura-Moreiras

New version! Submitted

Coverage: Oxford Business Law Blog

This paper presents a framework where sellers, an online platform with monopoly power, and consumers transact. We aim to study the interaction between the imposition of liability on the platform, the reputational sanctions exerted by consumers, and the internal measures adopted by the platform to keep in check the sellers, whenever a product generates losses to consumers. We show that introducing direct legal liability of the platform may have both positive and negative effects for safety investments. Additionally, when sellers are heterogeneous (with respect to their sensitivity to the sanctions from consumers or from the platform), legal liability on the platform will have an impact on the selection of participating sellers, although the sign and size of the effect largely depend on parameter values.

Public Procurement as a Demand-Side Policy: Project Competition and Innovation Incentives, with Elisabetta Iossa

CEPR Discussion Paper No. DP13664

We develop a model of project competition to compare two alternative and widely used approaches: (i) A (demand-side) procurement approach, in which the public authority specifies the type of project it will finance and (ii) a (supply-side) grant system, in which any type of project can be funded. The public authority can verify the characteristics of the projects submitted, but does not know which other projects are available. The paper sheds light on the role of public procurement to foster innovation.

Holding an Auction for the Wrong Project

How does the probability of being involved in a renegotiation during the execution of a procurement contract affect the behavior of the interested contractors? What are its implications for the optimal contractual choice made by the buyer? We investigate these issues in a context characterized by uncertainty about the adequateness of the project initially specified by the buyer. We determine under which circumstances the buyer may find it profitable to hold an auction for a project design which ex-ante does not have the highest probability of being adequate.

Research in Progress

Mitigating Generative AI Hallucinations, with Ester Manna and Shubhranshu Singh

Competition Between Offline and Online Retailers: Strategic Collaborations and Exclusive Contracts, with Ester Manna and Taha Nikkhah

Currently Resting Projects

Corruption-proof Contracts in Competitive Procurement, with Luca Livio

Relational Contracts and Courts' Interference, with Oscar Contreras

The Lingering Effect of Communism on Altruism and Reciprocity, with Ester Manna

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