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The Politics of Government Decision-Makin g: A Theory of Regulatory Capture: The Quarterly Journal of Economics, Vol. 106, No. 4. (1991), pp. 1089-1127.The paper develops an agency-theoret ic approach to interest-group politics and shows the following: (1) the organizational response to the possibility of regulatory agency politics is to reduce the stakes interest groups have in regulation. (2) The threat of producer protection leads to low-powered incentive schemes for regulated firms. (3) Consumer politics may induce uniform pricing by a multiproduct firm. (4) An interest group has more power when its interest lies in inefficient rather than efficient regulation, where inefficiency is measured by the degree of informational asymmetry between the regulated industry and the political principal (Congress).

Source: The Quarterly Journal of Economics, Vol. 106, No. 4. (1991), pp. 1089-1127.
Moral Hazard and Observability: The Bell Journal of Economics, Vol. 10, No. 1. (1979), pp. 74-91.The role of imperfect information in a principal-agen t relationship subject to moral hazard is considered. A necessary and sufficient condition for imperfect information to improve on contracts based on the payoff alone is derived, and a characterizati on of the optimal use of such information is given.

Source: The Bell Journal of Economics, Vol. 10, No. 1. (1979), pp. 74-91.
Incentives and Political Economy (Clarendon Lectures in Economics): (13 December 2001)Laffont examines the incentive problems created by delegating economic policy to self-intereste d politicians and the blurry line between flexibility of decision-makin g and discretion to pursue personal agendas. _

Source: (13 December 2001)
Optimal Delegation: Review of Economic Studies, Vol. 75, No. 1. (2008), pp. 259-293.Accept ed Paper Series

Source: Review of Economic Studies, Vol. 75, No. 1. (2008), pp. 259-293.
Incumbent performance and electoral control: Public Choice, Vol. 50, No. 1. (1 January 1986), pp. 5-25.

Source: Public Choice, Vol. 50, No. 1. (1 January 1986), pp. 5-25.
An Analysis of the Principal-Agen t Problem: Econometrica, Vol. 51, No. 1. (1983), pp. 7-45.Most analyses of the principal-agen t problem assume that the principal chooses an incentive scheme to maximize expected utility subject to the agent's utility being at a stationary point. An important paper of Mirrlees has shown that this approach is generally invalid. We present an alternative procedure. If the agent's preferences over income lotteries are independent of action, we show that the optimal way of implementing an action by the agent can be found by solving a convex programming problem. We use this to characterize the optimal incentive scheme and to analyze the determinants of the seriousness of an incentive problem.

Source: Econometrica, Vol. 51, No. 1. (1983), pp. 7-45.
Optimal Retention in Agency Problems: Journal of Economic Theory, Vol. 82, No. 2. (October 1998), pp. 293-323.This paper studies the interaction between a single long-lived principal and a series of short-lived agents in the presence of both moral hazard and adverse selection. We assume that the principal can influence the agents' behavior only through her choice of a retention rule; this rule is further required to be sequentially rational (i.e., no precommitment is allowed). We provide general conditions under which equilibria exist where (a) the principal adopts a "cut-off" rule under which agents are retained only when the reward they generate exceeds a critical bound; and (b) agents separate according to type, with better agents taking superior actions. We show that in equilibrium, a retained agent's productivity is necessarily declining over time, but that retained agents are also more productive on average than untried agents due to selection effects. Finally, we show that for each given type, agents of that type are more productive in the presence of adverse selection than when there is pure moral hazard (i.e., when that type is the sole type of agent in the model); nonetheless, adding uncertainty about agent-types cannot benefit the principal except in uninteresting cases.Journal of Economic LiteratureClas sification Numbers: C7, D7, D8.

Source: Journal of Economic Theory, Vol. 82, No. 2. (October 1998), pp. 293-323.
Common Agency and Coordination: General Theory and Application to Government Policy Making: The Journal of Political Economy, Vol. 105, No. 4. (1997), pp. 752-769.We develop a model of common agency with complete information and general preferences with nontransferabl e utility, and we prove that the principals' Nash equilibrium in truthful strategies implements an efficient action. We apply this theory to the construction of a positive model of public finance, where organized special interests can lobby the government for consumer and producer taxes or subsidies and targeted lump-sum taxes or transfers. The lobbies use only the nondistorting transfers in their noncooperative equilibrium, but their intergroup competition for transfers turns into a prisoners' dilemma in which the government captures all the gain that is potentially available to the parties.

Source: The Journal of Political Economy, Vol. 105, No. 4. (1997), pp. 752-769.
Incentives, Information, and Organizational Form: The Review of Economic Studies, Vol. 67, No. 2. (2000), pp. 359-378.We model an organization as a hierarchy of managers erected on top of a technology (here consisting of a collection of plants). In our framework, the role of a manager is to take steps to reduce the adverse consequences of shocks that affect the plants beneath him. We argue that different organizational forms give rise to different information about managers' performance and therefore differ according to how effective incentives can be in encouraging a good performance. In particular, we show that, under certain assumptions, the M-form (multi-divisio nal form) is likely to provide better incentives than the U-form (unitary form) because it promotes yardstick competition (i.e. relative performance evaluation) more effectively. We conclude by presenting evidence that the assumptions on which this comparison rests are satisfied for Chinese data.

Source: The Review of Economic Studies, Vol. 67, No. 2. (2000), pp. 359-378.
The Principal-Agen t Relationship with an Informed Principal, II: Common Values: Econometrica, Vol. 60, No. 1. (1992), pp. 1-42.

Source: Econometrica, Vol. 60, No. 1. (1992), pp. 1-42.

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