This paper investigates a team production problem where two parties invest sequentially to generate a joint surplus. We find that the first best can be implemented even if the investment return is highly uncertain. The optimal contract entails a basic dichotomy: it is a simple option contract if...

I examine the connection between the discursive dilemma and corporate law. The discursive dilemma (or doctrinal paradox) is a distinctive social choice problem that was first identified by Kornhauser and Sager and later used as the basis for a theory of organizational personality by Pettit. I...

Professional sports leagues have witnessed the appearance of sugar daddies - people who invest enormous amounts of money in clubs and become their owners. This paper presents a contest model of a professional sports league that incorporates this phenomenon. We analyze how the appearance of a...

This paper studies two-stage Cournot duopoly competition with a profit-maximizing firm and a joint-stock income-per-unit-of-capital-maximizing firm. In the first stage, each firm noncooperatively decides whether to offer lifetime employment as a strategic commitment. In the second stage, both...

In an efficient economy, capital should be quickly (re)allocated from declining firms and sectors to more profitable investment opportunities. This process is affected by the concentration of corporate control, which in turn is affected by market institutions. We employ a panel of 11,984 firms...

If an enterprise is restructured prior to privatization, underinvestment in restructuring is very likely. This is a special hold-up problem in privatization. Efficient restructuring can be attained if it is performed by either the buyer or a cash-revenue maximizing privatization agency....

This paper analyzes, in a setup where only the control over actions is contractible, the rationale for delegation. An organization must take two decisions. The payoffs are affected by a random parameter, and only the agent knows its realization. If the principal delegates the control over the...

The thesis by HALLWOOD [1994] is compactly restated, showing that most of Love's points are either already encompassed, or, are useful extensions of it. Love's idea that production cost differences between firms are necessarily caused by transaction costs is rejected, as differences between...

This paper compares benefits and costs related to hierarchical and decentralized organizations in an agency framework. We show that the relative efficiency of hierarchy diminishes in contexts with asymmetric information. When effort is not observable, performance-related pay is required in order...

The paper develops a theory of ownership structure based on the notion that corporate control and secondary market liquidity are not perfectly compatible with eath other. We analyze the tradeoff between these two objectives for two different ownership structures: the privately held firm, which...