We demonstrate that a multi-period model, and the valuations it implies, is essential for understanding inefficiency in cooperative organizational forms. Investment is efficient given the supply of input, but economic inefficiency arises because of over-supply of input induced by suppliers...

We consider the transitions among intragenerational and alternative intergenerational financing and liquidity risk sharing mechanisms, in an overlapping generations model with endogenous levels of long-lived investments. The existence and characterization of a self-sustaining mechanism, stable...

Tournament incentive schemes offer payments dependent on relative performance and are intended thereby to motivate agents to exert productive effort. Unfortunately, however, an agent may also be tempted to degrade the production of his competitors in order to improve the own relative position....

A civic society is distinguished by its language and its law. In this paper I suggest a theory that links these institutions via the notion of a standard contract. The theory is based upon two observations: that contracts are compiled in words, and that more common (standardized) words are...

In the classical period, it was a duty and an honour for rich Athenians to perform liturgies - to provide services for the common good. Using a rational-actor perspective, it is shown that the origin of this practice may go back to 594 B.C., when Solomon introduced a property qualification for...

This paper is a first step towards a positive theory of nonmajoritarian institutions. Delegation of powers to such institutions is best understood as a means of reducing certain political transaction costs. The precise nature of the relation between political sovereign and independent delegate...

This paper contributes to the literature on the foundations of incomplete contracts. In a holdup framework, we provide two sets of conditions under which simple delegation of authority is the solution to the complete-contracting problem. In cases where overinvestment can be ruled out, delegation...

Authority is modeled as the right to undertake a noncontractible decision in a joint project. The decision-maker is assumed to exert an externality on the other parties; overall surplus is shared according to generalized Nash bargaining. Under limited liability, the agent whose marginal costs...

We develop a formal model to explain the existence of dual distribution in franchising by assuming variations in location profitability. We posit that location quality dictates the choice between franchising and company ownership. We analyze the contract choice problem when location quality is...

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....