Standard enforcement instruments, such as more monitoring and harsher penalties, are commonly believed to reduce misbehavior. However, in many environments, including cybersecurity, tax enforcement, and environmental compliance, offenders may instead respond by investing in evasion technologies that allow them to offend while avoiding detection.

 A monitor and an agent compete for the technological lead through costly R&D. The monitor cannot observe whether offenses are detectable and learns about it through a noisy detection process. I characterize the game's equilibria and show that stronger deterrence can backfire: deterring detectable offenses increases the agent's incentives to invest in evasion technologies, leading to a more intense arms race with higher R&D spending and more evasion. The result reveals a fundamental trade-off between deterring detectable offenses and softening the technological competition. 

I study optimal procurement mechanisms when the relevant production technology is unknown at the time of contract design. A principal seeks to procure a good from agents who, after observing the mechanism, choose between two mutually exclusive technologies. An ex-ante unknown state of the world determines which technology enables production. I show that the optimal mechanism induces ex-post efficient trade and generates continuous sets of types adopting each technology. It partitions the type space into at most three intervals: agent types in the extreme intervals adopt a specific technology deterministically, while those in the intermediary interval mix between the two technologies with equal probability. Continuity enables ex-post efficiency whereas mixing enhances ex-ante efficiency. These results have applications to technology-dependent procurement in energy transition, vaccine production, and defense contracts.

This paper studies the problem of resource allocation in the presence of moral hazard. An agent exerts effort and privately chooses resource allocation between two types of capital: one that increases the productivity of exerting effort and one that reduces its cost. Our analysis provides conditions such that the agent’s problem exhibits complementarity between effort and productivity. In this case, we show that the agent under-allocates resources to increase productivity. The paper’s main result provides sufficient conditions on the production problem such that the agent strictly benefits from the allocation being private information. The model can be applied to several economic environments, such as technology procurement, product development, and time allocation in labor settings.

This paper develops a comprehensive framework to analyse the role of surplus sharing and violence in shaping criminal relationships. Combining evidence from the literature with game-theoretical models, we analyze the determinants and impact of violence and surplus sharing on cooperation in extra-legal environments. Firstly, we show that peaceful cooperation is only possible in high-value activities and requires "fair surplus" distribution. This result explains why some criminal markets such as international cocaine trafficking are functional even under low levels of violence. Secondly, we show that a credible threat of violence is essential for low-value generating activities such as extractive protection. Additionally, we show that a higher ability to exert violence induces more surplus appropriation. We use these results to reassess the mechanisms used in extra-legal settings by focusing on their impact on value creation, benefit distribution, and the credibility of threats of violence.