We examine the effect of uncertainty on horizontal mergers, considering that firms must decide whether to merge before observing the realized cost of the merged firm. The existing literature clarifies that merging firms facing cost uncertainty decide to merge if expected efficiency gains or...

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 effect of the regulation of telephony on Haan's [2001] analysis of the economics of free Internet access. Haan considers an unregulated market, and finds that free Internet access is compatible with an efficient outcome and avoids the double marginalization problem. We find that...

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...

In the period from the 9th to the 12th century, Germany witnessed essential steps from a backward agrarian society towards a considerable degree of specialization and trade. The two main institutional innovations of this development were the rise of market places (until the 11th century) and...

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...

This paper develops a general equilibrium model endogenizing labor specialization, firm size, firm specialization, interfirm trade, and economic fragmentation. In contrast to the standard neoinstitutionalist understanding of firms and markets as substitutes in organizing production, firms and...

Austrian economics allows us to identify a number of weak spots in the modern economics of organization that all relate to the treatment of knowledge. Specifically, this body of theory is open to the same kind of objections that HAYEK [1937, 1945] raised against economics, namely that it does...

In an increasing number of European countries, Internet service providers offer free Internet access. Telephone companies are willing to pay these providers based on the amount of traffic they generate. In this paper, we explain these phenomena. We argue that, by offering a contract that pays...