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.
Efficient Copyright Filters for Online Hosting Platforms, with Ester Manna, Antoni Rubí-Puig, and Adrian Segura-Moreiras
New version: UB WP E22-433
Recipient of the NET Institute Summer Grant 2021 (NET Institute Working Paper No. 21-03)
In this paper, we build a theoretical model in which an online hosting platform can develop a copyright filter to screen content that contributors wish to upload. The technology is imprecise, since non-infringing material may be incorrectly filtered out. Once the content is hosted on the platform, a right-holder may send a take-down notice if its own automated notice system, also imprecise, finds it to be copyright infringing. We investigate the efficient design of regulation and liability and we find that (i) the right-holder should be given incentives to evaluate fair use when submitting a notice and (ii) the platform should be fined if the take-down to notice ratio is above some predetermined threshold. Such dual system would achieve efficient copyright enforcement without excluding fair-use material.
Accurate Audits and Honest Audits, with Jacopo Bizzotto
New version R&R
Old Version: UB Economics Working Paper No. 417
A regulator hires an auditor to audit a firm. The anticipation of an accurate audit can induce a non-compliant firm to bribe the auditor. An inadequate salary from the regulator can induce the auditor to accept the bribe. Yet, we show that (i) as the budget available to the regulator increases, the optimal audit might become less accurate, and (ii) as the regulator gets access to complex contractual forms to deal with the auditor, the odds of collusion can increase. Key to these results is the observation that a regulator might induce the firm to invest more in compliance by tolerating collusion rather than by preventing it.
Control Aversion in Hierarchies, with Florian Engl, Holger Herz, and Ester Manna
CESifo Working Paper No. 9779 - R&R
Companies typically control various aspects of their workers’ behaviors. In this paper, we investigate whether the hierarchical distance of the superior who imposes such control measures matters for the workers’ ensuing reaction. In particular, we test, in a laboratory experiment, whether potential negative behavioral reactions to imposed control are larger when they are implemented by a direct superior rather than a hierarchically more distant superior. We find that hierarchical proximity indeed magnifies such control aversion and discuss several potential channels for this result.
Platform Liability with Reputational Sanctions, with Juanjo Ganuza, Fernando Gómez Pomar, Ester Manna, and Adrian Segura-Moreiras
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
The Lingering Effect of Communism on Altruism and Reciprocity, with Ester Manna
Project Choice and Social-Image Concerns, with Claudia Cerrone, Ester Manna, and Theodoros Saroglou Collecting data
Resting Projects
Corruption-proof Contracts in Competitive Procurement, with Luca Livio
Relational Contracts and Courts' Interference, with Oscar Contreras