Lars A. Stole studies strategic pricing, contracts and incentives theory, industrial economics and game theory. Stole's research has appeared in the American Economic Review, Econometrica, the Review of Economic Studies , and the RAND Journal of Economics to name a few. He has published a comprehensive survey of recent research in strategic price discrimination in "Price Discrimination in Competitive Environments" which has appeared in the Handbook of Industrial Organization, Volume 3.
He has been awarded numerous prizes for his research. Stole has received an Alfred P. Sloan Research Fellowship, a National Science Foundation Presidential Faculty Fellowship, and an Olin Fellowship in Law and Economics from the Harvard Law School. Stole is currently a research fellow for CESifo. In the past he has lectured at MIT, CERGE in Prague, and CES in Munich.
After earning a bachelor's degree from the University of Illinois in 1985 and a master's degree from the London School of Economics the following year, Stole studied at Yale University, MIT, and Harvard University Law School before earning a PhD in economics from MIT in 1991. As a student, he worked as a consultant for the Rand Corporation and served as editor of the Rand Journal of Economics from 1997 to 2001. He joined the Chicago Booth faculty in 1991. He currently serves as Co-Director of the Applied Theory Initiative which he co-founded in 2009.
Selected Publications
With David Martimort, “Market Participation in Delegated and Intrinsic Common-Agency Games,” RAND Journal of Economics (2009).
"Price Discrimination in Competitive Environments," Handbook of Industrial Organization (2008).
With Jeffrey Zwiebel, "Involuntary Unemployment and Intrafirm Bargaining," American Economic Review (2003).
With David Martimort, "The Revelation and Delegation Principles in Common Agency Games," Econometrica (2002).
With Jean-Charles Rochet, "Nonlinear Pricing with Random Participation," Review of Economic Studies (2002).
For a listing of research publications please visit Lars Stole’s
university library listing page.
New: Do Short-Term Managerial Objectives Lead to Under- or Over-Investment in Long-Term Projects
Date Posted: Jan 07, 2007
This paper studies managerial decisions about investment in long-run projects in the presence of imperfect information (the market knows less about such investments than the firm's managers) and short-term managerial objectives (the managers are concerned about the short-term stock price as well as the long-term stock price). Prior work has suggested that imperfect information and short-term managerial objectives induce managers to underinvest in long-run projects. We show that either underinves
The Revelation and Delegation Principles in Common Agency Games
Date Posted: Sep 01, 2004
In the context of common agency adverse-selection games we illustrate that the revelation principle cannot be applied to study equilibria of the multi-principal games. We then demonstrate that an extension of the taxation principle - what we term the delegation principle - can be used to characterize the set of all common agency equilibria.
Common Agency Equilibria with Discrete Mechanisms and Discrete Types
Date Posted: Sep 01, 2004
This paper characterizes the equilibrium sets of an intrinsic common agency game with discrete types and direct revelation mechanisms. After presenting a general algorithm to find the pure-strategy equilibria of this game, we use it to characterize these equilibria when the two principals control activities which are complements in the agent's objective function. Some of those equilibria may entail allocative inefficiency. For the case of substitutes, we demonstrate non-existence of such equilib
Barter, Liquidity and Market Segmentation
Date Posted: Sep 01, 2004
This paper explores the private and social benefits from barter exchange in a monetized economy. We first prove a no-trade theorem regarding the ability of firms with double-coincidences-of-wants to negotiate improvements in trade among themselves relative to the market outcomes. We then demonstrate that in the presence of liquidity shocks, introducing a non-monetary exchange avoids this limitation and enhances trade by (1) generating liquidity and (2) by segmenting the market place into low-de
Contractual Externalities and Common Agency Equilibria
Date Posted: Sep 01, 2004
This paper characterizes the equilibrium sets of an intrinsic common agency game with direct externalities between principals both under complete and asymmetric information. Direct externalities arise when the contracting variable of one principal affects directly the other principal's payoff. Out-of-equilibrium messages are used by principals to precommit themselves to distort their strategic behavior. We characterize pure-strategy symmetric equilibria arising in such games under complete infor
Non-Monetary Exchange Within Firms and Industry
Date Posted: May 12, 2000
This paper considers why non-monetary means of exchange, such as barter and the reciprocation of favors, are chosen by firms despite the usual benefits of monetary transactions. We consider the chosen means of exchange when both monetary and non-monetary exchange mechanisms are available. We illustrate three potential reasons for the emergence of non-monetary trade. First, a willingness to barter may reveal information that cannot be revealed solely through monetary trade. Second, non-moneta
Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning
Date Posted: Feb 01, 1998
This paper examines individual decision making when decisions reflect on people's ability to learn. We address this problem in the context of a manager making investment decisions on a project over time. We show that in an effort to appear as a fast learner, the manager will exaggerate his own information; but ultimately, he becomes too conservative, being unwilling to change his investments on the basis of new information. Our results arise purely from learning about competence rather than conc