This paper presents a two stage model of negligence and legal action. In the first stage the defendant decides on the level of due care to take while carrying out an action or activity. In the second stage an accident has occurred and the plaintiff brings suit. Lawyers (agents) invest in actions that are designed to increase the probability of success on behalf of their respective clients. First we present the symmetric casewhere all decisions on investment in legal services occur ex-post (after an accident has occured). We then look as the case where the potential injurer pre-commits to a level of legal services ex-ante (prior to an accident) and analyze the effect that pre-commitment in legal services has on the stage one choice of care. We then present a case study from the field of labour relations where strategic pre-commitment is used to influence the settlement of grievances. The grievance process in labour relations parallel civil litigation and a grievance can be viewed as equivalent to either a tort or a breach of contract; depending on the type of grievance., Essay, Published.
This paper extends the work of Mathewson and Winter (1985) in the field of franchising. Given the hypothesis that a franchise contract ensures quality compliance at a lower cost relative to alternative organizational structures, the existence of dual organizational structures within the same franchise chain is inadequately explained. This paper extends the basic model of Mathewson and Winter into a spatial framework, demonstrating that nonconvexities in monitoring costs will produce dual organizational structures within the same chain., Essay, Published.
This paper presents a model of environmental regulation in the presence of measurement costs and asymmetric information. Environmental regulation can be viewed as a form of agency problem where the polluting firms may have better information about the true level of their abatement activities than the regulator. If certain aspects of environmental quality are costly to measure, regulators may resort to proxies to infer information about environmental quality. This may allow firms to circumvent the regulatory constraints by maximizing along those margins that are costly to measure. This problem is especially acute when a single firm produces multiple pollutants., Essay, Published.