We have argued that convertible debt can be better than a simple mixture of debt and equity in stage financing situations. When the venture capitalist retains the option to abandon the project if in the medium term he receives a negative signal, the entrepreneur has an incentive to engage in...

We develop a model of firm size in which firms are unable to access as many consumers as they want. Nwely arrived consumers match randomly with firms. Subsequently consumers must pay "search costs"to be able to switch firms.