Information as a Substitute for Bailouts in Sovereign Debt Markets

This paper argues that multilateral financial institutions (MFIs), such as the International Monetary Fund, play an important informational role in international financial markets. By providing low-cost and high quality information, that is otherwise very costly for private lenders to obtain, the MFI allows a private lender to form a more accurate estimate of the credit-worthiness of a sovereign borrower. This creates a positive externality for private lenders and for sovereign borrowers with low risk credit ratings that are revealed by the provision of MFI information. The MFI can choose to internalize the negative externality created for sovereign borrowers who are revealed to be a higher credit risk by providing stand-by commitments to the sovereign. We construct a formal model of the private lenders decision to purchase costly information about the sovereign borrower. The model suggests that the free provision of MFI information has greater positive effects on financial markets the less risk-averse the private lender, the less information the private lender already has, the greater the size of the loan, and the smaller the expected default probability of the sovereign borrower.information default bailouts IMF

Revenue Sharing, Conjectures, and Scarce Talent in a Model of a Professional Sports League

We develop a model of a representative professional sports club that has the option of adopting one of two different forms of revenue sharing: traditional revenue sharing and central pool type revenue sharing. To adopt either form of revenue sharing, the league requires that a majority of clubs increase profit with adoption of the plan. We derive necessary conditions for either plan to garner enough support for a majority vote. The likelihood of forming a majority on the conjectures on acquiring talent that clubs possess. Competitive conjectures make revenue sharing more likely, while cartel conjectures make revenue sharing less likely. Empirical results provide evidence in favor of the model for four North American professional sports leagues.revenue sharing conjectures sports league voting profit

Damages: Expert Witnesses

In the language of the Federal Rules of Evidence, an expert is one who possesses scientific, technical, or other specialized knowledge [that] will assist the trier of fact to understand the evidence or to determine a fact in issue. \u27 When the jury is sorting through evidence and conflicting party claims on disputed issues, such persons are potentially useful sources of information. At the same time, attorneys\u27 widespread use of expert witnesses has troublesome aspects. To the chagrin of some, expert witnesses have come to dominate civil trials, particularly those involving technical issues where large amounts of money are at risk. The Sabia case is just such a case. As would be expected, experts dominate the litigation. This portion of the symposium will discuss the role of experts and their interaction with the attorneys who hire them, as well as the attorneys who prepare to cross-examine them