Akifumi Ishihara

Relational Contracting and Endogenous Formation of Teamwork

We study a relational contracting model with two agents where each agent faces multiple tasks: effort toward the agent’s own project and helping effort toward another agent’s project. We first propose the two-step approach, which is useful for characterizing the equilibrium of relational contracting models with multiple agents and signals. Then, we show that the optimal task structure is either specialization without help or teamwork with a substantial amount of help for any discount factor: teamwork with a small amount of help is never optimal. Specialization with high powered incentives can be implemented by relative performance evaluation, which is advantageous to self-enforcement. If a positive amount of helping effort is induced, then the evaluation scheme must be substantially different in order to overcome the multitasking problem. Consequently, a small amount of help is dominated by specialization with high powered incentives.

On Multitasking and Job Design in Relational Contracts

We investigate the optimal job design in a repeated principal-agent relationship with multiple tasks where the performance measurement is distorted, aggregated, and nonverifiable. We compare task bundling, where all the tasks are assigned to a single agent, with task separation, where the tasks are split and assigned to two agents. Compared to task bundling, task separation mitigates misallocation of effort among the tasks but tightens the self-enforcing constraint due to dispersion of informal bonuses to multiple agents. Consequently, task separation is better than task bundling if and only if the discount factor of the parties is high. We also consider an extended model in which the principal combines explicit incentive pays based on a verifiable and distorted signal. In such cases, task separation is optimal if the discount factor is sufficiently high or sufficiently low.

Transparency and Performance Evaluation in Sequential Agency

This study investigates the effects of transparency in a sequential moral hazard problem, where a leader and a follower consecutively take an action. The principal chooses whether the organization is transparent or opaque, by which we mean that the action of the leader is observable to the follower or not. Compared with the opaque organization, the transparent organization imposes an additional incentive constraint on the follower but may relax the incentive constraint on the leader. Informativeness of the signal crucially affects the optimal degree of transparency as well as the optimal incentive scheme. The transparent (respectively, opaque) organization tends to be preferred when the optimal incentive contract exhibits joint (respectively, relative) performance evaluation.

Strategic Candidacy for Political Compromise

We study political competition with policy-motivated citizen candidates and demonstrate two-candidate competition where one of them has no chance of being elected. If an elected candidate has multiple policies she can credibly implement, then she can choose her implementing policy contingent on who are the rivals in the election. Given that the winning candidate takes such a strategy, the opponent wishes to run even with no chance of winning the election since policy compromises can be induced from the winner. We furthermore demonstrate that such a two-candidate equilibrium with strategic candidacy is supported by repeated election even if candidates do not have multiple ideal policies.

Minor Candidates as Kingmakers

We consider a sequential entry model with three candidates who cannot commit to any policy announcement during the campaign. The study focuses on how a minor candidate, who wins only when unopposed, influences the electoral outcome. We show that unless the Condorcet winner (i.e., the winner in every pairwise vote) coincides with the grand winner (i.e., the winner of the three-candidate competition), the minor candidate is a kingmaker in the sense that his preferred rival wins regardless of the order of the entry decisions. To influence the outcome, the minor candidate could either (i) enter strategically without any chance to win, or (ii) enter if and only if the Condorcet winner already has entered.This article studies a citizen-candidate model where the entry decision is sequential rather than simultaneous. We focus on a situation where there exist three potential candidates including a minor citizen who never wins in a vote unless she is the unique candidate. This sequential entry model has several contrasts to the simultaneous entry models: (i) strategic candidacy occurs on a two-candidate equilibrium; and (ii) the minor citizen may be pivotal in that her more preferred competitor becomes the winner. Furthermore, a Condorcet winner is no longer a dominant candidate in that the entrant on a one-candidate equilibrium may not be a Condorcet winner and there may exist no one-candidate equilibrium even if there exists a Condorcet winner among the potential candidates.

Role of Information Rents in Relational Contracts

We study a repeated contracting model in which the agent has private information and the performance measure is unverifiable. In an optimal stationary contract, when the discount factor is not high, the principals objective shifts from purely reducing the information rent toward increasing the total surplus to sustain the relational contract. As a result, the total surplus is not monotonically increasing in the discount factor and could decrease when the unverifiable performance measure becomes verifiable.

Concessions and Repression in Conflict

We build a model for predicting civil wars where the government bargains with an opposition group using concessions and repression. The equilibrium is either a state of perpetual peace where there are only concessions and no repression, or the equilibrium leads to civil wars, where the concessions are lower and repression higher as compared to the peace equilibrium. An initial movement towards democracy for an autocracy leads to more con‡ict. After a threshold level of democracy, we achieve a state of peace. This provides one explanation for the inverted-U shape between probability of civil war and democracy found in empirical studies. The model also gives testable predictions on the relationship between civil war, degree of democracy and the instruments of concessions and repression. We assemble a unique country-level panel data set on wars, peace agreements, repression, institutions, disasters and economic indicators. We …nd evidence consistent with the model. Word count: 7,319.We build a model for predicting civil wars where the government bargains with a rebel group using concessions and repression. The equilibrium is either a state of perpetual peace where there are concessions but no repression or a state of repressive equilibrium that can lead to civil wars. At the lowest levels of political competition, a move towards open electoral participation decreases the ability of the state to use repression to limit challengers, increasing the likelihood of war. At higher levels, an increase in competition decreases the probability of war by increasing concessions to the rebel group. Increasing concessions makes war less likely because it decreases the spoils of war and provides one explanation for the non-monotonicity found between probability of civil war and democracy. We test the prediction of this non-linearity using the technique in [Hansen (2000). “Sample Splitting and Threshold Estimation.” Econometrica 68:575–603] and find evidence consistent with the model.