This paper offers an explanation of rationally incomplete contracts, where incompleteness refers to unforeseen contingencies. Agents enter a two-sided moral hazard relationship, in which a commitment to discard parts of the joint resources may be ex-ante efficient. This happens through costly...

In a model where biased judges can distort contract enforcement, we uncover positive feedback effects between the use of innovative contracts and legal evolution that improve verifiability and contracting over time. We find, however, that the cost of judicial bias also grows over time because...

We investigate the roles of productivity and the specificity of inputs for the international sourcing strategy of firms which are part of a multinational network. We present a framework in which firms decide to import from a foreign independent supplier or from their related party abroad...

This paper examines the determinants of intra-firm trade in U.S. imports using detailed country-product data. We create a new measure of product contractibility based on the degree of intermediation in international trade for the product. We find important roles for the interaction of country...

This paper investigates a hitherto unexplored rationale for firms to enter into joint ventures. We model risky projects with autocorrelated productivity shocks as creating an option value of investing over time so that later investments benefit from the information revealed by the realization of...

A government agency wants a facility to be built and managed to provide a public service. Two different modes of provision are considered. In a public-private partnership, the tasks of building and managing are bundled, while under traditional procurement, these tasks are delegated to separate...

Contractual execution generates hard information, available to the contracting parties, even when contracts are secretly executed. Building on this simple observation, the paper shows that incomplete contracts can be preferred to complete contracts. This is because (i) execution of incomplete...

We propose an endogenous growth model with offshoring to investigate its effects on product innovation and growth in the country of origin. Offshoring is associated with reduced feedback from offshored plants to domestic labs as well as coordination problems between the offshored and domestic...

In this paper we combine a non-cooperative decision-making game in a federal structure with two levels of interest and an incomplete contract which sets the rules of the game. The question we pose is how to combine ex ante efficiency of the design with ex post efficiency of the outcomes in the...

The rise of offshoring of intermediate inputs raises important questions for commercial policy. Do the distinguishing features of offshoring introduce novel reasons for trade policy intervention? Does offshoring create new problems of global policy cooperation whose solutions require...