| This dissertation consists of four chapters. The first chapter provides a general introduction. The second chapter analyzes the impact of politics on regulatory contracts in the public transportation industry. While adopting an incentive regulation framework, we take into account such political factors by considering a non benevolent regulator. We estimate the parameters of the demand and cost functions as well as the shadow cost of public funds, the density of firms' types and the weight associated with consumer surplus as a function of political factors and financial constraints faced by cities. Empirical results, using data from French bus transit contracts, show that cities with leftist majorities and with environmentalists in their councils tend to put larger weights on consumer surplus leading them to lower the price for public transportation. As expected, the level of debt per capita restraints the cities in their redistributive policies.; In the third chapter we study incentive regulatory contracts that set some aspect of product quality as well as price. We first extend the Laffont and Tirole (1990) model to incorporate stochastic demand and cost, find the optimal contract in the presence of asymmetric information between the regulator and the regulated firm, and suggest how it can be implemented. We then derive the econometric model and estimate the consumer's demand function, the firm's quality adjusted cost function, the distribution of the firms' type, and the shadow cost of public funds again using data from French urban transportation.; The fourth chapter develops a theory of the evolution of preferences for reciprocity, trust, and the voluntary provision of public goods in a society composed exclusively of rational, Bayesian optimizers. We study the evolution of a community consisting of "opportunists," who simply maximize material payoffs, and "reciprocators," who prefer joint cooperation to exploiting their opponents. In equilibrium, opportunists contribute to the provision of the public good in order to maintain reputations for being reciprocators, so as to be trusted in their private market transactions. The need to provide a public good enhances the evolutionary stability of the reciprocator type. The model is tested using U.S. survey data on trust. |
