Publications

“More is Less: Why Parties May Deliberately Write Incomplete Contracts” (with Oliver Hart),  2024.  Cambridge Elements in Law, Economics and Politics.  Video abstract.

Why are contracts incomplete?  Transaction costs and bounded rationality cannot be a total explanation since states of the world are often describable, foreseeable, and yet are not mentioned in a contract. Asymmetric information theories also have limitations.   We offer an explanation based on “contracts as reference points”.  Including a contingency of the form, “The buyer will require a good in event E”, has a benefit and a cost.  The benefit is that if E occurs there is less to argue about; the cost is that the additional reference point provided by the outcome in E can hinder (re)negotiation in states outside E.  We show that if parties agree about a reasonable division of surplus, an incomplete contract is strictly superior to a contingent contract.  If parties have different views about the division of surplus, an incomplete contract can be superior if including a contingency would lead to divergent reference points.

“Competition, Equity and Quality in Public Services” (with Carol Propper), European Economic Review, 2024, 164 (May), 104719

This paper examines the implications of consumer heterogeneity for the choice of competition and monopoly in public services delivery. In a setting with motivated providers who favour one type of service user over another, we show that competition can raise average quality. However, this may be at the expense of the minority type of user if the providers favour the majority type.  Then an inequity averse regulator may protect the minority by not introducing competition.  Alternatively, if the providers favour the minority type, the regulator may introduce competition to incentivize the providers to pay attention to the less rewarding majority type. 

"Coordinating Public Good Provision by Mediated Communication" (with In-Uck Park), American Economic Journal: Microeconomics, 2021, 13 (2): 311-342.  Faculti interview on Coordination of Humanitarian Aid based on this paper.

We examine a setup where two agents allocate a fixed budget between public goods in two areas. The agents may be biased to one area, which is their private information. Without communication, the funds are allocated inefficiently, resulting in gaps and duplication in public good provision. Direct communication between the agents is ineffective and cannot resolve the coordination failure even when the potential biases are negligible. Coordination can be improved by a mediator who filters the information communicated by the agents. Our results can throw light on how to improve coordination of humanitarian aid by an appropriately designed information management system.

"Common Ownership of Public Goods" (with Evagelos Pafilis), Journal of Economic Behavior & Organization, 2020, 180, 555-578.  

We analyze ownership of public goods in a repeated game focusing on common ownership. Under common ownership an owner’s access to the public good cannot be restricted by other owners. We find that under common ownership both the value of the relationship and the gain from deviation are high. Common ownership can provide the best incentives for cooperation when the value of the public good cannot be increased much by maintenance investments or the maintenance costs are sufficiently convex. We argue that these conditions are satisfied in Ostrom’s field studies of irrigation systems and common lands. 

"Continuing Contracts" (with Oliver Hart), Journal of Law, Economics, and Organization, 2020, 36 (2): 284–313.

Parties often regulate their relationships through “continuing” contracts that are not fixed term but roll over: employment is a leading example. Our premise is that parties apply fairness when they revise a continuing contract and that prior terms, together with market information, will be a reference point. A continuing contract can reduce (re)negotiation costs relative to a short-term or long-term contract. However, fair bargaining makes adjusting to outside options difficult and may cause inefficient outcomes. An implicit promise of a long-term relationship, as in employment, can improve matters. 

“Location and Ownership of Public Goods” (with Evagelos Pafilis), Economics Letters, 2014, 123 (3): 395-397. 

“Nature of Human Capital, Technology and Ownership of Public Goods”, Journal of Public Economics, 2012, 96 (11-12): 939-945.

“Organizational Design, Technology and the Boundaries of the Firm”, Economica, 2010, 77 (307): 544-564.

“Competition and Decentralisation in Government Bureaucracies” (with Carol Propper), Journal of Economic Behavior and Organization, 2008, 67 (3-4): 903-916.

”Coordination Failure in Foreign Aid”, The B.E. Journal of Economic Analysis & Policy, 2007, 7 (1) (Topics), Article 43 .

"Reputation and the Allocation of Ownership", Economic Journal, 2002, 112 (481): 539-558.

Book chapters 

"Can Technological Change Weaken the Robustness of Common-Property Regimes?" (with Evagelos Pafilis), Sheila Foster and Chrystie Swiney (eds) The Cambridge Handbook of Commons Research Innovations, Cambridge University Press, 2022, 295-308.

“Reform within Government: The Case of Quasi-Markets and Health Care”, (with Carol Propper), published in Finnish in Eero Lehto (ed.) Monopoly or Competition?  -  Privatisation, Regulation and Limits to Competition, Atena, Helsinki, 1997, 317-332. 

Other

“Oliver Hart, Nobel laureate”, Vox, 2016.