Suchergebnisse

Abstract
We consider a funding competition for targeted projects. Potential participants have stochastic opportunity costs, and do not know the number of competitors. The funding agency sets a budget cap indicating the maximum funding that participants may request. We show that raising the budget cap helps to attract more participants but causes an increase in the requested funds. A higher budget cap is optimal when the preferences of researchers and the funding agency are more congruent, competition is lower, targeted projects have larger social value, the cost of public funds is smaller, or bidding preparation costs are lower.

Tighter regulation and more powerful supervision are being enacted after the global financial crisis. Although this trend may have positive welfare effects, it may also impose large social costs due to the strong reliance on supervisory information. We argue that offering banks a Flexible Supervision contract, designed to be chosen by those banks that will otherwise attempt to capture the supervisor, is a mechanism to implement the most efficient regulation under asymmetric information. The result that Flexible Supervision outperforms Mandatory Supervision remains robust to a series of extensions to our baseline model. Policy implications follow directly: Benevolent regulators should enact a Flexible Supervision regime for the less risky, more capitalized and transparent banks in addition to the traditional Mandatory Supervision regime. ; info:eu-repo/semantics/published