Abstract. This paper studies the market for monopolistically supplied sweepstakes. We derive equilibrium demands for fixed-prize and variable-prize sweepstakes and determine the profit maximizing prize level and payout ratio respectively. It can be profitable to offer each type of sweepstake when there are large enough number of weighted utility consumers who have constant absolute risk attitudes, are strictly averse to small as well as symmetric risks, and display longshot preference behavior. Moreover, for the variable-prize sweepstake, the supplier will generally find it profitable to combine sweepstakes from two populations, offering a single sweepstake to the combined population. This corroborates the recent spate of mergers of smaller state lotteries into larger ones.

We analyze a simple stochastic environment where policymakers can be threatened by ”nasty ” interest groups. In the absence of these groups, the policymaker’s desire for reelection guarantees that good policies are implemented for every realization of the shock. When pressure groups can harass the policymaker, good policies will be chosen for only a subset of states of nature. In order to enlarge this subset, the public will often find it convenient to elect ”strong ” political leaders, increase the cost of exerting pressure and provide rents tothoseinpower. Thelastresultcouldbeusedasanexplanation for the existence of political parties. They play a role resembling that of the supervisor in the literature on collusion in hierarchical agency. The paper also helps explain why honest politicians may choose bad policies. JEL classification: D72, D78.

Overinvestment in certain …rms or sectors induced by corporate fraud, where informed insiders strategically manipulate outside investors’beliefs by exaggerating …nancial performance and economic prospects, has been endemic historically, and has recently attracted much attention. We present a theory that reconciles corporate fraud and overinvestment with e ¢ cient capital markets, building on shareholder-manager agency con‡icts and investment renegotiation in active takeover markets. While shareholders attempt to design managerial compensation contracts and investment policies to elicit valuable information from insiders, investments that are ex post ine ¢ cient are not renegotiation-proof. For a wide range of conditions, the optimal renegotiation-proof contract induces overstatements by managers, i.e., exaggerated disclosures regarding future investment opportunities with subsequent overinvestment by rational investors. Our framework helps explain why instances of corporate fraud and overinvestment tend to cluster around the transition to new technologies, concentrate in industries with valuable growth options, and intensify when the cost of external …nancing is low.

seille, Toulouse and Vienna. We study optimal taxation in the general extensive model: the only decision of the participants in the economy is to choose between working (full time) or staying inactive. People differ in their productivities and in other features which determine their work opportunity costs. We characterize the optimal tax schemes when the distribution of work opportunity costs is independent of productivity. When the government has a redistributive stance, there are a number of cases where the low skilled workers face larger financial incentives to work than in the laissez-faire (negative average tax rates). In particular, this occurs whenever the social weights vary continuously with income and the social weight assigned to the less skilled workers is larger than average.

We thank the editor, Mark Armstrong, three anonymous referees, conference participants at

* Financial support for the initial research that eventually led to this chapter was provided by a grant from BellSouth New Zealand. The authors are grateful to Mark Armstrong,

†I am very grateful to Mark Armstrong, V. Bhaskar, Michihiro Kandori and two referees of this journal for helpful comments. Part of this research was conducted while I was visiting the University College London. Their hospitality is gratefully acknowledged.

Estimating impacts of poison operations using mark-recapture analysis and population viability analysis: an example with New Zealand robins (Petroica australis)

∗We would like to thank Mark Armstrong, Matthew Gentzkow, Martin Peitz, and seminar par-ticipants at Chicago and ESSET 2005 in Gerzensee. The second author would like to thank the University of Chicago, Graduate School of Business, for their hospitality during the time this project was conducted

I am especially indebted to Mark Armstrong and Audris Wong for their many helpful comments and insights. Financial support received from the National Science Foundation, the University of Chicago, GSB, and from the CES. This chapter surveys the developments in price discrimination theory