We analyze a divisible good uniform-price auction that features two groups each with a finite number of identical bidders and present conditions under which a unique privately revealing equilibrium exists. We derive novel comparative static results highlighting that increases in transaction...

This paper investigates relational incentive contracts with continuous, privately-observed agent types that are persistent over time. With fixed agent types, full separation is not possible when continuation equilibrium payoffs following revelation are on the Pareto frontier of attainable...

Risk-neutral individuals take more risky decisions when they have limited liability. Risk-neutral managers may not when acting as agents under contract and taking costly actions to acquire information before taking decisions. Limited liability makes it optimal to increase the reward for outcomes...

Risk-neutral individuals take more risky decisions when they have limited liability. Risk-neutral managers may not when acting as agents under contract and taking costly actions to acquire information before taking decisions. Limited liability makes it optimal to increase the reward for outcomes...

Existing theories of a firm's optimal capital structure seem to fail in explaining why many healthy and profitable firms rely heavily on equity financing, even though benefits associated with debt (like tax shields) appear to be high and the bankruptcy risk low. This holds in particular for...

We analyze a relational contracting problem, in which the principal has private information about the future value of the relationship. In order to reduce bonus payments, the principal is tempted to claim that the value of the future relationship is lower than it actually is. To induce...

We provide new experimental evidence which suggests an asymmetric discouragement effect in lottery contests with heterogeneous abilities. Compared to a symmetric contest, subjects invest less effort when facing a stronger opponent, but they invest the same when facing a weaker opponent. Our...

We explore the determinants and effects of trust relationships between upstream suppliers and downstream producers. Using unique survey data on individual supplier-buyer relationships in the German automotive industry, we show, by means of different measures of supplier-buyer trust, that higher...

Credence goods are characterized by informational asymmetries between sellers and consumers that invite fraudulent behavior by sellers. This paper presents the results of a natural field experiment on taxi rides in Athens, Greece, set up to measure different types of fraud and to examine the...