Several recent papers have studied the impact of macroeconomic shocks on the financial policies of firms. However, they only consider the case where these macroeconomic shocks affect the profitability of firms but not the financial markets conditions. We study the polar case where the...

The paper extends the Baron and Myerson [Baron, D., Myerson, R.B., 1982. Regulating a monopolist with unknown costs. Econometrica 50, 911-930] model of monopoly regulation to bidimensional adverse selection: both the marginal cost and the fixed cost of the monopoly are unknown to the regulator....