Surajeet Chakravarty

Construction Contracts (or: "How to Get the Right Building at the Right Price?")

Most contracts that individuals enter into are not written from scratch; rather, they depend upon forms and terms that have been successful in the past. In this paper, we study the structure of form construction contracts published by the American Institute of Architects (AIA). We show that these contracts are an efficient solution to the problem of procuring large, complex projects when unforeseen contingencies are inevitable. This is achieved by carefully structuring the ex post bargaining game between the Principal and the Agent. The optimal mechanism corresponding to the AIA construction form is consistent with decisions of the courts in several prominent but controversial cases, and hence it provides an economic foundation for a number of the common-law excuses from performance. Finally, the case of form contracts for construction is an example of how markets, as opposed to private negotiations, can be used to determine efficient contract terms.

On the Efficiency of Standard Contracts the Case of Construction

Most contracts that individuals enter into are not written from scratch but depend upon forms and terms that have been successful in the past. In this paper we study the structure of the form construction contracts published by the American Institute of Architects (AIA). We show that these contracts are an efficient solution to the problem of procuring large, complex projects when unforeseen contingencies are inevitable. This is achieved by carefully structuring the ex post bargaining game between the Principal and the Agent. The optimal mechanism corresponding to the AIA construction form is consistent with decisions of the courts in several prominent, but controversial, cases, and hence provides an economic foundation for a number of the common-law excuses from performance. Finally, the case of form contracts for construction is an example of how markets, as opposed to private negotiation, can be used to determine efficient contract terms.

Manna from Heaven or Forty Years in the Desert: Optimal Allocation without Transfer Payments

Often an organization, government or entity must allocate goods without collecting payment in return. This may pose a difficult problem when agents receiving those goods have private information in regards to their values or needs or discriminating among agents is not an option. In this paper, we search for an optimal mechanism to allocate goods when the designer is benevolent. While the designer cannot charge agents, he can receive a costly but wasteful signal from them. We show that for a large class of distributions of valuations, ignoring these costly signals by giving agents equal share (or using lotteries if the goods are indivisible) maximizes the social surplus. In other cases, those that send the highest signal should receive the goods; however, we then show that there exist cases where more complicated mechanisms are superior.

Religious fragmentation, social identity and cooperation: Evidence from an artefactual field experiment in India

We study the role of village-level religious fragmentation on intraand inter-group cooperation in India. We report on data on two-player Prisoners’ Dilemma and Stag Hunt experiments played by 516 Hindu and Muslim participants in rural India. Our treatments are the identity of the two players and the degree of village-level religious heterogeneity. In religiously-heterogeneous villages, cooperation rates in the Prisoners’ Dilemma, and to a lesser extent the Stag Hunt game, are higher when subjects of either religion play with a fellow in-group member than when they play with an out-group member or with someone whose identity is unknown. Interestingly, cooperation rates among people of the same religion are significantly lower in homogeneous villages than in fragmented villages in both games. JEL – classification numbers: C93, D03, H41

The Benefits of Costly Voting

We present a costly voting model in which each voter has a private valuation for their preferred outcome of a vote. When there is a zero cost to voting, all voters vote and hence all values are counted equally regardless of how high they may be. By having a cost to voting, only those with high enough values would choose to incur this cost. Hence, the outcome will be determined by voters with higher valuations. We show that in such a case welfare may be

Designing Incentives under Multidimensional Performance Measures

We attempt to shed some light on the problem of providing incentives to service providers such as teachers and doctors. Often, outcomes of such services are not verifiable, and this has been cited as a reason for lack of incentive provision. We derive the contract offered by a principal if, in addition to moral hazard, the output of the agent may not be verified. We show that verified high attainment may not be rewarded. In this case, the bonus is increasing in the ability to verify output. We also show that an increase in potential nonverifiability may lead to efficiency gains and be beneficial for the principal.