Early Resolution of Uncertainty in Public Policy: Applications to Financial Regulation, the U.S. Supreme Court, and International Taxation

This dissertation examines the trade-off between the additional benefit of waiting for better information and the additional cost of delaying a decision. The chapters below focus on government policies designed to address this trade-off and show when better social outcomes can be achieved if early decisions-even those based on scarce and unreliable information-are allowed. Chapter 1 shows that conditioning banker bonuses on early loan repayment forecasts can reduce the amount of risk taken by a bank only if bonuses can be "clawed" back in the event of the loan's default. Chapter 2 shows that allowing a court to intervene early in the legislative process can result in more constitutional laws than forcing the court to rule in just judicial review proceedings. And in Chapter 3, the IRS's advance pricing agreement (APA) program is studied. The APA program can reduce a multinational's tax uncertainty by allowing the firm and IRS to agree on future tax payments. Emphasis is placed in this dissertation on how these government policies affect the public's incentives and when these policies are socially beneficial.