Richard Holden

• PhD
• Professor at UNSW Sydney

Using data on essentially every U.S. Supreme Court decision since 1946, we estimate a model of peer effects on the Court. We estimate the impact of justice ideology and justice votes on the votes of their peers. To identify the peer effects, we use two instruments that generate plausibly exogenous variation in the peer group itself, or in the votes...

We study the benefits and costs of “opacity” (deliberate lack of transparency) of incentive schemes as a strategy to combat gaming by better informed agents. In a two‐task moral hazard model in which only the agent knows which task is less costly, the agent has an incentive to focus his effort on the less costly task. Opaque schemes, which make a r...

In this paper we conduct a laboratory experiment to test the extent to which Moore and Repullo’s subgame perfect implementation mechanism induces truth-telling, both in a setting with perfect information and in a setting where buyers and sellers face a small amount of uncertainty regarding the good’s value. We find that Moore–Repullo mechanisms fai...

This article provides a brief overview of the Property-Rights Theory of the firm, pioneered by Grossman and Hart (1986) and Hart and Moore (1990), and situates the theory in other literatures.

This article discusses recent developments in the study of voting and elections. How people end up voting in an election depends on (a) how effective voting power is distributed among voters and (b) the strategic interactions between voters and other interested parties. These are, in turn, affected by institutional arrangements, such as the composi...

Most projects, in most walks of life, require the participation of multiple parties. While it is difficult to unite individuals in a common endeavor, some people, who we call “movers and shakers,” seem able to do it. The paper specifically examines moving and shaking of an investment project, whose return depends both on its quality and the total c...

Allan Barton and one of the authors of this tribute (GCH) had been friends since 1950 when they both started Commerce Degrees at the University of Melbourne. They were together in the Honours Years (Final Division) of 1952 and 1953, they overlapped at Cambridge where both did Ph.Ds (GCH, at King’s, 1955–58, Allan, at Christ’s, 1956–60) and they wer...

Gerrymandering refers to the practice of political actors drawing the boundaries of their own electoral districts for partisan or other advantage. It is of particular interest in US politics, where it is widespread. It has implications for the partisan composition of legislatures, the representation of minorities, and the entrenchment of incumbents...

In this paper we conduct a laboratory experiment to test the extent to which Moore and Repullo's subgame perfect implementation mechanism induces truth-telling in practice, both in a setting with perfect information and in a setting where buyers and sellers face a small amount of uncertainty regarding the good's value. We find that Moore-Repullo me...

In this paper we conduct a laboratory experiment to test the extent to which Moore and Repullo’s subgame perfect implementation mechanism induces truth-telling in practice, both in a setting with perfect information and in a setting where buyers and sellers face a small amount of uncertainty regarding the good’s value. We nd that Moore-Repullo mech...

At an exogenous deadline, Receiver must take an action, the payoff of which depends on Sender’s private binary type. Sender privately observes whether and when an opportunity to start a public flow of information about her type arrives. She then chooses when to seize this opportunity. Starting the information flow earlier exposes to greater scrutin...

It is often suggested that incentive schemes under moral hazard can be gamed by an agent with superior knowledge of the environment, and that deliberate lack of transparency about the incentive scheme can reduce gaming. We formally investigate these arguments in a two-task moral hazard model in which the agent is privately informed about which task...

This article develops a model with endogenously coarse rules. A principal hires an agent to take an action. The principal knows the optimal state-contingent action, but cannot communicate it perfectly due to communication constraints. The principal can use previously realized states as examples to define rules of varying breadth. We analyze how rul...

It is often suggested that incentive schemes under moral hazard can be gamed by an agent with superior knowledge of the environment, and that deliberate lack of transparency about the incentive scheme can reduce gaming. We formally investigate these arguments. Ambiguous incentive schemes induce more balanced efforts from an agent who performs multi...

We analyze a model of US presidential primary elections for a given party. There are two candidates, one of whom is a higher quality candidate. Voters reside in m different states and receive noisy private information about the identity of the superior candidate. States vote in some order, and this order is chosen by a social planner. We provide co...

We consider full implementation in complete-information environments when agents have an arbitrarily small preference for honesty. We offer a condition called separable punishment and show that when it holds and there are at least two agents, any social choice function can be implemented by a simple mechanism in two rounds of iterated deletion of s...

We analyze a rational-expectations model of price formation in an intermediate-good market under uncertainty. There is a continuum of firms, each consisting of a party who can reduce production cost and a party who can discover information about demand. Both parties can make specific investments at private cost, and there is a machine that either p...

We consider the robustness of extensive form mechanisms to deviations from common knowledge about the state of nature, which we refer to as information perturbations. First, we show that even under arbitrarily small information perturbations the Moore-Repullo mechanism does not yield (even approximately) truthful revelation and that in addition the...

This paper characterizes the optimal way for a principal to structure a rank-order tournament in a moral hazard setting (as in Lazear and Rosen in J Polit Econ 89:841–864, 1981). We find that it is often optimal to give rewards to top performers that are smaller in magnitude than corresponding punishments to poor performers. The paper identifies fo...

This volume brings together essays by many of the leading scholars of comparative constitutional design from many perspectives to collectively assess what we know - and do not know - about the design process as well as particular institutional choices concerning executive power, constitutional amendment processes and many other issues. Bringing tog...

Both asset ownership and contracts play important roles in providing incentives for relationship specific investments, and hence in determining the boundary of the firm. Significant progress has been made in understanding the roles that these instruments play, but largely in isolation from each other. We provide a framework for understanding when a...

We develop a multi-period, multi-task principal-agent model in which neither the principal nor the agent knows the mapping from actions to outputs. The agent can learn about the production function over time by exerting effort and observing output. The model has a stark prediction: incentives may have a negative impact on agent effort if, by exerti...

The difficulty of constitutional amendment, in most contexts, clearly depends on both the formal rules governing amendment and a variety of other factors. This chapter explores the significance one such non-textual factor: the size, or scale, of a polity. It, first, identifies a number of theoretical reasons to think that the “denominator” for cons...

Sanford Grossman and Oliver Hart used the theory of incomplete contracts to develop answers to the question "What is a firm, and what determines its boundaries?" in their path-breaking paper on "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration" ( Journal of Political Economy , 1986, vol. 94, no. 4). Perhaps the cent...

In recent years, scholars have come to a general agreement about the relationship between partisan gerrymandering and racial redistricting. Drawing districts that contain a majority of minority voters, as is often required by the Voting Rights Act, is said to help minority voters in those districts but hurt the Democratic Party more broadly. This A...

We consider the robustness of extensive form mechanisms when common knowledge of the state of Nature is relaxed to common p-beliefs about it. We show that with even an arbitrarily small amount of such uncertainty, the Moore-Repullo mechanism does not yield (even approximately) truthful revelation and in addition there are sequen-tial equilibria wit...

We analyze a rational-expectations model of information acquisition and price formation in an intermediate- good market: prices and net supply are non-negative, there are no noise traders, and the intermediate good has multiple potential uses. Several of our results differ from the classic Grossman-Stiglitz approach. For example, the price mechanis...

We analyze a rational-expectations model of price formation in an intermediate-good market under uncertainty. There is a continuum of dyads, each consisting of an upstream party and a downstream party. Both parties can make specific investments at private cost, and there is a machine that either party can own. As in property-rights models, differen...

We analyze a rational-expectations model of price formation in an intermediate-good market under uncertainty. There is a continuum of dyads, each consisting of an upstream party and a downstream party. Both parties can make specific investments at private cost. As in property-rights models, different governance structures induce different investmen...

The foundations of incomplete contracts have been questioned using or extending the subgame perfect implementation approach of Moore and Repullo (1988). We consider the robustness of subgame perfect implementation to the introduction of small amounts of asymmetric information. We show that Moore- Repullo mechanisms may not yield (even approximately...

We analyze a rational-expectations model of price formation in an intermediate-good market. There is a continuum of dyads, each consisting of an upstream party and a downstream party. Both parties can make speci…c investments at private cost. As in property-rights models, di¤erent governance structures induce di¤erent invest-ments. As in rational-e...

We analyze a rational-expectations model of information acquisition and price for-mation in the spirit of Grossman and Stiglitz (1976, 1980), but for goods markets: markets where prices and net supply must be non-negative. Players have heteroge-neous costs of acquiring information, and those who choose not to acquire information make inferences fro...

We analyze a rational-expectations model of price formation in an intermediate-good market under uncertainty. There is a continuum of dyads, each consisting of an upstream party and a downstream party. Both parties can make speci…c invest-ments at private cost. As in property-rights models, di¤erent governance structures induce di¤erent investments...

The probability that an incumbent in the U.S. House of Representatives is reelected has risen dramatically over the last half-century; it now stands at nearly 95%. A number of authors and commentators claim that this rise is due to an increase in bipartisan gerrymandering in favor of incumbents. Using a regression discontinuity approach, we find ev...

We analyze a model of optimal gerrymandering where two parties receive a noisy signal about voter preferences from a continuous distribution and simultaneously design districts in different states and in which the median voter in a district determines the winner. The form of the optimal gerrymander involves "slices" of extreme right-wing voters tha...

Principal-agent problems are widespread in economics. Since it is usually believed little can be said in general settings (Mirrlees (1975), Grossman and Hart (1983)) ap-plied work typically uses the …rst-order approach, justi…ed by strong assumptions on the distribution of shocks, or restricts attention to linear contracts, justi…ed by the assumpti...

It is generally believed that amendment to the United States Constitution has proven to be unduly onerous. Consistent with that belief, we show that, even if the original Article V amendment requirement were deemed optimal, the effective super-majority required by Article V has substantially increased over time, as the size of the relevant voting b...

We analyze a model in which voters are uncertain about the policy preferences of candidates. Two forces affect the probability of electoral success: proximity to the median voter and campaign contributions. First, we show how campaign contributions affect elections. Then we show how the candidates may wish to announce a range of policy preferences,...

We analyze a model of optimal gerrymandering where two parties simultaneously design districts in di¤erent states and in which the median voter in a district deter-mines the winner. The form of the optimal gerrymander involves "slices" of extreme right-wing voters that are paired with "slices" of left-wing voters, as in Friedman and Holden (2008)....

Standard intuitions for optimal gerrymandering involve concentrating one's extreme opponents in "unwinnable" districts ("packing") and spreading one's supporters evenly over "winnable" districts ("cracking"). These intuitions come from models with either no uncertainty about voter preferences or only two voter types. In contrast, we characterize th...

The theory of incomplete contracts has been recently questioned using or extend- ing the subgame perfect implementation approach of Moore and Repullo (1988). We consider the robustness of this mechanism to the introduction of small amounts of asymmetric information. Our main result is that the mechanism may not yield (even approximately) truthful r...

We analyze a model in which voters are uncertain about the policy preferences of candidates. Two forces a¤ect the probability of electoral success: proximity to the median voter and campaign contributions. First, we show how campaign contributions a¤ect elections. Then we show how the candidates may wish to announce a range of policy preferences, r...

The United States Supreme Court has long recognized compactness as an important principle in assessing the constitutionality of political districting plans. We propose a measure of compactness based on the distance between voters within the same district relative to the minimum distance achievable -- which we coin the relative proximity index. We p...

We analyze a model in which voters are uncertain about the policy preferences of candidates. Two forces a¤ect the probability of electoral success: proximity to the median voter and campaign contributions. We show that campaign contributions may have no equilibrium e¤ect on electoral success, despite having large out of equilibrium e¤ects. Moreover...

This paper characterizes the optimal way for a principal to structure a rank-order tournament in a moral hazard setting (as in Lazear and Rosen in J Polit Econ 89:841–864, 1981). We find that it is often optimal to give rewards to top performers that are smaller in magnitude than corresponding punishments to poor performers. The paper identifies fo...

A risk neutral buyer observes a private signal s 2 (a,b), which informs her that the mean and variance of a normally distributed risky asset are s and 2 s respectively. She then sets a price at which to acquire the asset owned by risk averse "outsiders". Assume 2 s 2 0, 2 for some 2 > 0 and let B = s 2 (a,b) | 2 s = 0 . If B = ;, then there exists...

Within-…rm job promotions, wage increases, bonuses, and CEO compensation are often interpreted as resulting from Lazear-Rosen-style tournaments. They are prizes for top performers in rank-order tournaments set up to deal with moral hazard. We …nd that, because agents are risk averse, it is generally optimal to punish poor performers rather than to...

There is substantial empirical evidence that top managers at regulated firms have systematically different incentive contracts than those at unregulated ones. At regulated firms, managerial compensation is both lower and less performance sensitive. Less well understood, however, is what shape managerial contracts at regulated firms should take. We...

It is commonly believed that HIV testing is essential for disease prevention. Indeed, spending on counseling and testing accounts for over half of the total expenditures on HIV prevention in some African countries. Despite this, there is evidence that even when testing is available most people do not take advantage of it, and there is virtually no...

The probability that an incumbent in the United States House of Representatives is reelected has risen dramatically over the last half-century. It now stands at more than 98%. A number of authors and commentators claim that this rise is due to an increase in bipartisan gerrymandering in favor of incumbents. Using a regression discontinuity approach...

It is generally believed that amendment to the United States Constitution has proven to be unduly onerous. Consistent with that belief, we show that, even if the original Article V amendment requirement were deemed optimal, the effective super-majority required by Article V has substantially increased over time, as the size of the relevant voting b...

During the 1990s, the structure of pay for top corporate executives shifted markedly as the use of stock options greatly expanded. By the early 2000s, as the dot-com boom ended and the Nasdaq stock index melted down, these modern executive incentive schemes were being sharply questioned on many grounds--for encouraging excessive risk-taking and a s...

This paper studies the choice of electoral rules, in particular the question of minority representation. Majorities tend to disenfranchise minorities through strategic manipulation of electoral rules. With the aim of explaining changes in electoral rules adopted by US cities (particularly in the South), we show why majorities tend to adopt ”winner-...

The size of a supermajority required to change an existing contract varies widely in different settings. This paper analyzes the optimal supermajority requirement, determined by multilateral bargaining behind the veil of ignorance. The optimum is determined by a tradeoff between reducing hold-up power of small groups and reducing expropriation of m...

A dominant, net buyer of a certain asset receives a private signal that is correlated with its mean value. We call this insider a Boesky Insider when the quality of the received signal is such that the future value of the asset can be predicted with certainty. We show that even an infinitesimal probability that the insider is a Boesky Insider resul...

Books reviewed in this article: K. Hoover, Casuality in Macroeconomics Jason Potts, The New Evolutionary Microeconomics: Complexity, Competence and Adaptive Behaviour Stephen Dobson and John Goddard, The Economics of Football Hazel Bateman, Geoffrey Kingston and John Piggott, Forced Saving: Mandating Private Retirement Incomes Sanjai Bhagat and Ric...

A dominant, net buyer of a certain asset receives a private signal that is correlated with its mean value. We call this insider a Boesky Insider when the quality of the received signal is such that the future value of the asset can be predicted with certainty. We show that even an infinitesimal probability that the insider is a Boesky Insider resul...

We consider the robustness of extensive form mechanisms when common knowledge of the state of Nature is relaxed to common p-beliefs about it. We show that with even an arbitrarily small amount of such uncertainty, the Moore-Repullo mechanism does not yield (even approximately) truthful revelation and in addition there are sequen- tial equilibria wi...

A large literature considers the impact of product market competition on the in- ternal e¢ ciency of …rms-what Leibenstein (1966) called "X-E¢ ciency."Formal models tend to produce ambiguous results which depend crucially on the strategy space in the product market. By utilizing monotone methods, we are able to take a substantially more general app...

This paper considers the possible benefi ts to ap rincipal from knowing less about the performance of workers when workers differ in their innate ability. Since Lazear and Rosen (1981) and Green and Stokey (1983) it has been know that, when common shocks to output are large, rank-order tournaments domi- nate individual contracts as a way to incenti...