This paper examines how the choice of exchange rate regime can signal financial rectitude and, in so doing, influcence a country's ability to borrow internationally in domestic currency. We develop a model in which the constant probability of a 'type change' creates incentives for disciplined...

Are lending contracts between international financial institutions (IFIs) and sovereign borrowers optimal? To address this question this paper builds on two ideas. First, the prospect of future debt relief can make it profitable for an IFI to continue lending even if lending contracts are...

One of the basic principles that allow a smooth operation of the markets is the equilibrium between supply and demand. According to this principle, when demand exceeds supply, the price mechanism will try to bring the system back into equilibrium. When this thinking is applied to the housing...

Admati and Perry (1987) derive the equilibrium in a bargaining game between a seller and buyer when the buyer's valuation is private information. They show that, for some parameter values, trade occurs at the Rubinstein (1982) prices given the buyer's true valuation (pl if the buyer has a low...

Abstract Mandatory convertibles, which are equity-linked hybrid securities that automatically convert to common stock on a pre-specified date, have become an increasingly popular means of raising capital in recent years (about $20 billion worth issued in 2001 alone). This paper presents the...

This paper shows that monitoring too much a partner in the initial phase of a relationship may not be optimal if the goal is to determine his loyalty to the match and if the cost of ending the relationship increases over time. The intuition is simple: by monitoring too much we learn less on how...

Punitive damage awards have been widely criticized for generating a plaintiff’s windfall (i.e., a payment in excess of the costs of pursuing the punitive claim), which promotes unnecessary litigation, the escalation of liability insurance premiums and over-deterrence. In an attempt to...

Punitive damage awards have been widely criticized for their unpredictability (2004 Economic Report of the President) and for generating a plaintiff’s windfall (i.e., a payment in excess of the costs of pursuing the punitive claim), which promotes unnecessary litigation (Dodson, 2000),...

In an attempt to reduce the liability insurance costs of firms, several US states have implemented many different kinds of tort reform. Some reforms take the form of caps or limits on punitive damage awards while others have mandated that a proportion of the award be allocated to the plaintiff...

In an attempt to reduce the liability insurance costs of firms, several US states have implemented many different kinds of tort reform. Some reforms take the form of caps or limits on punitive damage awards while others, called “split-awardsâ€, have mandated that a proportion of the...