This paper looks at the dynamic properties of insurance contracts when insurers have better technology at preventing catastrophic losses than the insured. The prevention technology is owned by the insurers and is permanent. If long-term contracts are not possible, the insured is faced with a...

Why do larger corporations have more layers in their hierarchy? My contention in this paper is that hierarchies arise because economic agents have limited ability to anticipate and ascertain every possible contingency they are faced with. As a result, the complete contract may become too complex...

In this paper, we examine the effect of increases in health care costs and general inflation on optimal insurance policies and waste in a model of imperfect information with costly auditing. We show that in such a setting, individuals will buy more than full insurance. Moreover, as the cost of...

An extensive academic literature exists on the optimal compensation of top executives. A less-developed literature pertains to the optimal compensation of middle management personnel. The goal of this paper is to address that concern. The setup we use is that of a firm s president (the...

This paper addresses the question of whether R&D should be carried out by an independent research unit or be produced in-house by the firm marketing the innovation. We define two organizational structures. In an integrated structure, the firm that markets the innovation also carries out and...

This paper characterizes the optimal insurance contract in an environment where an informed agent can misrepresent the state of the world to a principal who cannot credibly commit to an auditing strategy. Because the principal cannot commit, the optimal strategy of the agent is not to tell the...

In just several years, Israel developed a strong venture capital industry that places it among the top countries in terms of capital-GDP ratio. The strategy of the Israeli government was twofold. First, the government strongly stimulated the demand for venture capital, using R&D grants,...

To ease the financing of growing SMEs, governments found or indirectly fund venture capital companies. These companies act in a context of extreme information asymmetry and potentially exorbitant agency costs. The rigorous governance of these companies is thus pivotal to their performance. We...

This paper examines the impact of capital structure on the optimality of contingent financial contracts. The role of financial relationships is not only to provide funds but also to offer insurance to a risk adverse entrepreneur through contingent financial transfers. Since such financial...

Some analysts and policy makers consider that the growth of New Technology Based Firms (NTBF) is impeded by an insufficient supply of capital. In Canada, as in other jurisdictions, the public authorities have interceded to fill this equity gap by increasing the supply of funds. However, several...