We identify and investigate the basic `hold-up' problem which arises whenever each party to a contingent contract has to pay some ex-ante cost for the contract to become feasible. We then proceed to show that, under plausible circumstances, a `contractual solution' to this hold-up problem is not...

In this paper, I analyze the behavior of public schools facing vouchers. The literature on the effect of voucher programs on public schools typically focuses on student and mean school scores. This paper tries to go inside the black box to investigate some of the ways in which schools facing the...

In the paper we analyze how the possibility of revealing information to a competitor alters the entry/investment behavior of a first entrant. We show that once it has entered the market, the firm might refrain from making further profitable investments in order to hide information from the...

This paper looks at markets characterized by the fact that the demand side is insured. In these markets a consumer purchases a good to compensate consequences of unfavorable events, such as an accident or an illness. Insurance policies in most lines of insurance base indemnity on the insured’s...

The Second Generation Theory (SGT) of fiscal federalism, which draws upon contemporary economic and industrial organization theory, hitherto focuses only on the negative benefits of public decentralization: the potentially superior ability to align perverse incentives vis-à-vis the centralized...

According to empirical studies of venture capital finance, the division of control rights between entrepreneur and venture capitalists is often contingent on certain measures of firm performance. If the indicator of the company’s performance (eg earnings before taxes and interest) is low, the...

This paper suggests a reason, other than asymmetric information, why agency contracts are not explicitly contingent on the agent's performance or actions. Two ingredients are essential to this reason. The first is the written form that contracts are required to take to be enforceable. The second...

Many couples do not sign prenuptial agreements, even though this often leads to costly and inefficient litigation in case of divorce. In this paper we show that strategic reasons may prevent agents from signing a prenuptial agreement. Partners which have high productivity in marital activities...

We look at a job-market model of bilateral uncertainty. Workers are uncertain about what job descriptions advertised by firms really mean and firms are uncertain about the qualifications of workers before they are interviewed. Both types of uncertainty can be resolved but both processes are...