We analyze the effects of optimism and overconfidence when the manager's compensation package includes severance pay … and the CEO has bargaining power. We find that optimism does not affect incentive pay but increases severance pay with a …

We propose a simple model of borrower optimism in competitive lending markets with asymmetric information. Borrowers in … material costs of optimism. Lenders' contract design shapes these benefits and costs. The model yields three key results. First … empirical evidence, a low cost of lending and a booming economy lead to optimism and the widespread collateralization of loans …

certain optimism (whereby subjects overestimate probabilities for favorable outcomes), the former being about twice as strong …

' reaction to unplanned events, they might agree to pay higher costs of negotiation to complete contracts. Using a unique sample … of U.S. principal-agent consulting contracts and a negative shock to trust between parties staggered across space and … states of the world contracts cover increase after a drop in trust. The results hold for several text-analysis-based measures …

I investigate a simple model of advance-purchase contracts as a mode of financing costly projects. The analysis can …