Transferable Control

In this paper, we introduce the notion of transferable control, defined as a situation where one party (the principal, say) can transfer control to another party (the agent) but cannot commit herself to do so. One theoretical foundation for this notion builds on the distinction between formal and real authority introduced by Aghion and Tirole, in which the actual exercise of authority may require noncontractible information, absent which formal control rights are vacuous. We use this notion to study the extent to which control transfers may allow an agent to reveal information regarding his ability or willingness to cooperate with the principal in the future. We show that the distinction between contractible and transferable control can drastically influence how learning takes place: with contractible control, information about the agent can often be acquired through revelation mechanisms that involve communication and message-contingent control allocations; in contrast, when control is transferable but not contractible, it can be optimal to transfer control unconditionally and learn instead from the way in which the agent exercises control

Endogenous leadership in teams

In this paper we study the mechanics of “leading by example” in teams. Leadership is beneficial for the entire team when agents are conformists, i.e., dislike effort differentials. We also show how leadership can arise endogenously and discuss what type of leader benefits a team most

Financial Super-Markets: Size Matters for Asset Trade

The paper presents a two-country macroeconomic model in which the number of financial assets is endogenous. Imperfect substitutability of assets and international transaction costs give a comparative advantage to large markets, because of demand effects. Agents have more incentives to undertake risky investments on those markets; they can also diversify risk at a lower cost. Prices of financial assets are higher in the large area because asset markets are broader. We also analyse the impact of domestic transaction costs and issuing costs on financial markets and returns. Our theory has important implications for the pattern of international trade in risky assets.International macroeconomics, asset trade, transaction costs, incomplete markets

Developing drought resilience in irrigated agriculture in the face of increasing water scarcity

In many countries, drought is the natural hazard that causes the greatest agronomic impacts. After recurrent droughts, farmers typically learn from experience and implement changes in management to reduce their future drought risks and impacts. This paper aims to understand how irrigated agriculture in a humid climate has been affected by past droughts and how different actors have adapted their activities and strategies over time to increase their resilience. After examining recent drought episodes from an agroclimatic perspective, information from an online survey was combined with evidence from semi-structured interviews with farmers to assess: drought risk perceptions, impacts of past drought events, management strategies at different scales (regional to farm level) and responses to future risks. Interviews with the water regulatory agency were also conducted to explore their attitudes and decision-making processes during drought events. The results highlight how agricultural drought management strategies evolve over time, including how specific aspects have helped to reduce future drought risks. The importance of adopting a vertically integrated drought management approach in the farming sector coupled with a better understanding of past drought impacts and management options is shown to be crucial for improving decision-making during future drought events