Research Interests: Economic Theory, Political Economics, Organization Economics, International Relations
Email: camboni@wisc.edu
Institutional Website: https://econ.wisc.edu/staff/camboni-matteo
Education: Northwestern Ph.D. 2022
Main advisors (Jeff Ely and Alessandro Pavan).
Monitoring Team Members: Information Waste and the Transparency Trap (with Michael Porcellacchia) AEJ:Microeconomics (Forthcoming)
We study contract design and endogenous monitoring within a model of moral hazard in teams where a firm can exploit individual and team performance measures to incentivize teamwork. Our analysis reveals that firms' concerns about low trust among teammates can justify two common but otherwise puzzling observations: information waste and transparency trap. We find that (i) firms predominantly employ individual performance bonuses, ignoring relevant information about team output, and (ii) competition for better contracts induces workers to engage in a self-defeating race toward higher effort transparency. Notably, the firm may be indifferent to or even benefit from trust concerns, challenging the idea that robustness concerns invariably harm the principal's payoffs. Our analysis hinges on a novel trade-off between classical information rents and strategic insurance rents emerging from trust concerns.
We revisit the classic job-market signaling model of Spence (1973), introducing profit-seeking schools as intermediaries that design the mapping from candidates' efforts to job-market signals. Each school commits to an attendance fee and a monitoring policy. We show that, in equilibrium, a monopolist school captures the entire social surplus by committing to low information signals and charging fees that extract students' surplus from being hired. In contrast, competition shifts surplus to students, with schools vying to attract high-ability students, enabling them to distinguish themselves from their lower-ability peers. However, this increased signal informativeness leads to more wasteful effort in equilibrium, contrasting with the usual argument that competition enhances social efficiency. This result may be reversed if schools face binding fee caps or students are credit-constrained.
How do decisions change with the economic environment and with time? This paper studies general nonstationary stopping problems and provides the methodological tools to answer these questions. First, we identify conditions that ensure a monotone relation between decisions' timing and outcomes. These conditions apply to a prevalent class of economic environments. Second, we develop a theory of monotone comparative statics for stopping problems, offering general and unifying qualitative insights into the decision-maker's value and stopping behavior. We apply our results to models of information acquisition, bankruptcy, irreversible investment, and option pricing to explain documented patterns at odds with current theories..
Motivated by both contemporary and historical evidence, we develop a model for studying optimal taxation, ruler selection, and internal conflicts in (ethnically-)divided societies. We show that the political environment generates social stratification, reinforces inequality, and fuels internal conflicts. First, we show that the ruler optimally creates a ranking among social groups and demands lower taxes from higher ranks. This divide-and-conquer strategy (political favoritism) creates social stratification even among identical social groups and reinforces inequality by assigning higher ranks (thus lower taxes) to wealthier/stronger groups. Second, we show that the ruler's extractive capacity increases in society's fractionalization and the ruler's power. Nevertheless, social groups select the strongest group as the ruler to minimize their tax burden. Finally, we show that these political considerations generate a novel class of conflicts, status conflicts, where resource appropriation/destruction aims at climbing society's ranking, thus obtaining a more favorable fiscal treatment or even rulership.
We propose and test a theory of how geopolitical risk and the economic balance between great powers shape geoeconomic fragmentation. In our model, countries design foreign policies to pursue their goals while managing the risk of coercion by two great powers. As geopolitical risk rises, some remain non-aligned, while others make significant concessions to one power. These alignments endogenously generate two distinct spheres of influence. Changes in the balance of power affect fragmentation in a non-trivial way: as the world becomes less unipolar (e.g., with China’s rise), countries deepen their alignments, pushing the two spheres farther apart. Paradoxically, China’s growth may lead countries already in the US sphere to offer even greater concessions to the US. Empirically, we test the model and show it correctly predicts alignment shifts following two shocks to the balance of power: the USSR’s collapse and China’s rise.
“Testing Input vs. Output” (with Christoph Carnhel)
“How Power Becomes Influence: the Weaker Powers Index" (with Michael Porcellacchia)
”Escaping Thucydides' Trap: The Geography of Hot and Cold Wars" (with Michael Porcellacchia)
“The Political Determinants of Social Unrest: Theory and Evidence from early modern France” (with Michael Porcellacchia and Cédric Chambru)
