This paper investigates the role of campaign advertising and the opportunity of legal restrictions on it. An electoral race is modeled as a signalling game with three classes of players: many voters, two candidates, and one interest group. The group has non-verifiable insider information on the candidates ’ quality and, on the basis of this information, offers a contribution to each candidate in exchange for a favorable policy position. Candidates spend the contributions they receive on non-directly informative advertising. This paper shows that: (1) A separating equilibrium exists in which the group contributes to a candidate only if the insider information about that candidate is positive; (2) Although voters are fully rational, a ban on campaign advertising can be welfare-improving; and (3) Split contributions may arise in equilibrium (and, if they arise too often, they are detrimental to voters).

[We develop a simple model of the price impact of institutional herding. The empirical literature indicates that institutional herding positively predicts short-term returns but negatively predicts long-term returns. We offer a theoretical resolution to this dichotomy. In our model, career-concerned money managers trade with security dealers endowed with market power and exhibit an endogenous tendency to imitate past trades. This tendency is exploited by dealers and thus affects prices. In equilibrium, institutional herding positively predicts short-term returns but negatively predicts long-term returns. Our article also generates several new, testable predictions that link institutional herding with the time-series properties of returns and volume.]

In a model of career concerns for experts, when is a principal hurt from observing more information about her agent? This paper introduces a distinction between information on the consequence of the agent’s action and information directly on the agent’s action. When the latter kind of information is available, the agent faces an incentive to disregard useful private signals and act according to how an able agent is expected to act a priori. This conformist behavior hurts the principal in two ways: the decision made by the agent is less likely to be the right one (discipline) and ex post it is more difficult to evaluate the agent’s ability (sorting). The paper identifies a necessary and sufficient condition on the agent signal structure under which transparency on action is detrimental to the principal. The paper also shows the existence of complementarities between transparency on action and transparency on consequence. The results on the distinction between transparency on action and transparency on consequence are then used to interpret existing disclosure policies in politics, corporate governance, and delegated There is a widespread perception, especially among economists, that transparency is a beneficial

This paper defines the power of a media organization as its ability to induce voters to make electoral decisions they would not make if reporting were unbiased. It derives a robust upper bound to media power over a range of assumptions about the beliefs and attention patterns of voters. The paper then presents estimates of the power index for the United States and shows how these can inform merger analysis and other policy debates.

Principals often operate on misspecified models of their agents’ preferences. When preferences are such that non-local incentive constraints may bind in the optimum, even slight misspecification of the preferences can lead to large and non-vanishing losses. Instead, we propose a two-step scheme whereby the principal: (1) identifies the model-optimal menu; and (2) modifies prices by offering to share with the agent a fixed proportion of the profit she would receive if an item were sold at the model-optimal price. We show that her loss is bounded and vanishes smoothly as the model converges to the truth. Finally, two-step mechanisms without a sharing rule like (2) will not yield a valid approximation.

We build a comparable and bottom-up measure of CEO labor supply for 1,114 CEOs and investigate whether family and professional CEOs differ along this dimension. Family CEOs work 9% fewer hours relative to professional CEOs. CEO hours worked are positively correlated with firm performance and account for 18% of the performance gap between family and professional CEOs. We study the sources of the differences in labor supply across family and professional CEOs by exploiting firm and industry heterogeneity and variation in meteorological and sports events. Evidence suggests that family CEOs value or can pursue leisure activities more so than professional CEOs.

The logic of the linkage principle of Milgrom and Weber (1982) extends to price discrimination. A non-linear pricing monopolist who sells to a single buyer always prefers to commit to publicly reveal information affiliated to the valuation of the buyer. This is also valid when the value of the buyer affects the opportunity cost of the seller.

To investigate general patterns in news information in the United States, we combine a protocol for identifying major political news stories, 11 monthly surveys with 15,000 participants, and a model of news discernment. When confronted with a true and a fake news story, 47 percent of subjects confidently choose the true story, 3 percent confidently choose the fake story, and the remaining half are uncertain. Socioeconomic differences are associated with large variations in the probability of selecting the true news story. Partisan congruence between an individual and a news story matters, but its impact is up to an order of magnitude smaller. (JEL D72, D83, L82)

We present a novel theory of the employment relationship. A manager can invest in attention technology to recognize good worker performance. The technology may break and is costly to replace. We show that as time passes without recognition, the worker's belief about the manager's technology worsens and his effort declines. The manager responds by investing, but this investment is insufficient to stop the decline in effort and eventually becomes decreasing. The relationship therefore continues deteriorating, and a return to high performance becomes increasingly unlikely. These deteriorating dynamics do not arise when recognition is of bad performance or independent of effort. (JEL D21, D82, J24, M54)

It has long been recognized that the media play an essential role in government accountability. Even in the absence of censorship, however, the government may influence news content by maintaining a “cozy” relationship with the media. This paper develops a model of democratic politics in which media capture is endogenous. The model offers insights into the features of the media market that determine the ability of the government to exercise such capture and hence to influence political outcomes.