In this paper we consider a regulated monopoly that can pad its costs to increaseits cost reimbursement. Even while padding is ineácient the optimal incentivescheme tolerates some padding of costs to reduce the information rents paid tolow cost types. It is shown that high cost ßrms pad costs...

We develop a microeconomic banking framework to analyze how liquiditymanagement decisions influence the availability of liquidity to depositors, the viabilityof the asset transformation process and the solvency of banking firms. In particular,we focus on how the optimal allocation of deposits...

We examine a Stackelberg game where a financially constrainedleader faces competition from a ‘deep pocket’ follower. We analyzethe consequences of this trade-off between a financial and a strategicadvantage for both the design of financial contracts and market structure.We derive conditions...

A second-generation model of currency crises is combined with a standard model ofbanks as providers of insurance against liquidity risk. In a pegged exchange rateregime, after funds have been committed to the banks, news arrives about the qualityof the banks’ assets and about the exchange rate...

This paper examines the impact of monetary policy on UK firms’ access to bank and market finance whenallowance is made for differences in firm-specific characteristics. A theoretical model determines the cut-off valuesfor project profitability that would allow firms to access bank or market...

This paper investigates the role of trade credit in the transmissionof monetary policy. Most models of the transmission mechanism allowthe firm to access only financial markets or bank lending according tosome net worth criterion. In our model we introduce trade creditas an additional source of...

We develop and analyse a simple general equilibrium model withcapital market imperfections We find that the impact of monetarypolicy on real economic activity depends on the initial distributionof wealth in the economy. Changes in the opportunity cost of fundsaffect not only the choice of...

We develop a simple labour turnover model of general training. Upon completion of theirtraining, apprentices are equipped with general skills and they accumulate firm-specificskills by continuing working for their training firm. Job turnover is associated with a loss ofaccumulated firm-specific...

When the equilibrium of the economy depends on the coordinationof actions of a large number of agents the level of optimism can be-come a deciding factor. We propose an equilibrium selection processwhere the level of optimism is endogenously determined...

This paper develops a theoretical framework of professional sports leagueswhich captures the bargaining process of sporting labour market negotiations. A transfer market, which does not have a counterpart in other labour markets butit is an implicit and ubiquitous component of the market for...