We analyze the mechanism-design problem of a principal allocating amounts of a perfectly divisible good to $n$ agents, each of whom desires as much of the good as possible. The principal has an ideal allocation for each agent, which is private information held by that agent. The principal has access to an auditing technology that allows her to perfectly uncover the private information of any $k$ ($<n$) of the agents. We present a tractable approach to solve for the principal's optimal mechanism, which combines targeted random audits with allocative distortions to ensure compliance. Agents whose reported type falls above a cutoff enter a pool for random audits. The allocation to audited agents coincides with the principal's ideal. For unaudited agents, upward distortions reward conservative reporting, while downward distortions discipline over-reporting.

This paper considers a decision maker who receives a reward if he takes a costly action above an unknown threshold. A designer controls the information available to the decision maker about the threshold. The designer's objective is increasing in the decision maker's action. Our goal is to characterize the information she would optimally disclose. We show that two properties of optimal disclosure policies are robust to the specification of the designer's preferences. First, the decision maker achieves the reward exactly when he would have optimally chosen to do so if he had complete information about the threshold. Second, the decision maker remains indifferent between receiving the designer's message or acting on the basis of his prior. An important determinant of the structure of optimal policies is the designer's attitude towards marginal increases in the decision maker's action. We present explicit solutions in the two cases in which the designer's utility exhibits either increasing or diminishing returns in the decision maker's action. In each case, the decision maker’s posterior beliefs keep him confused about which action he should take. Ex-post, there is a large set of optimal actions, and in doubt the decision maker chooses the largest one. A contribution of the paper is the characterization of optimal persuasion schemes in an environment in which actions and states live in a continuum. 

We develop and formalize an equilibrium concept for a dynamic economy in which production takes place in worker cooperatives. The concept rules out allocations of workers to cooperatives in which a worker in one cooperative could move to a different cooperative and make both herself and the existing workers in the receiving cooperative better off. It also rules out allocations in which workers in a cooperative would be made better off by some of the other workers leaving. We also provide a minimum-information equilibrium-selection criterion which operationalizes our equilibrium concept. We illustrate the application of our concept and operationalization in the context of an overlapping-generation economy with specific preferences and technology. The cooperative economy follows a dynamic path qualitatively similar to the path followed by a capitalist economy, featuring gradual convergence to a steady state with constant output. However the cooperative economy features a static inefficiency, in that, for a given aggregate capital stock, firm size is smaller than what a social planner would choose. On the other hand, the cooperative economy cannot be dynamically inefficient, and could accumulate capital at a rate that is higher or lower than the capitalist economy. As a result, steady-state income per worker could be higher or lower in the cooperative economy. We also present an illustrative calibration which quantitatively compares steady-state incomes and welfare in a cooperative and in a capitalist economy.

This paper reconsiders the problem of a durable-good monopolist who cannot make intertemporal commitments. The buyer’s valuation is binary and his private information. The seller has access to dynamic contracts and, in each period, decides whether to deploy the previous period’s contract or to replace it with a new one. The main result of the paper is that the Coase Conjecture fails: the monopolist’s payoff is bounded away from the low valuation irrespective of the discount factor.

We build a flexible model with search frictions in three markets: credit, labor, and goods markets. We then apply this model (called CLG) to three different economies: a flexible, finance-driven economy (the UK), an economy with wage moderation (Germany), and an economy with structural rigidities (Spain). In these three countries, goods and credit market frictions play a dominant role in entry costs and account for 75% to 85% of the total entry costs. In the goods market, adverse supply shocks are amplified through their propagation to the demand side, as they also imply income losses for consumers. This adds up to, at most, an additional 15% to 25% to the impact of the shocks. Finally, the speed of matching in the goods market and the credit market accounts for a small fraction of unemployment: most variation in unemployment comes from the speed of matching in the labor market.