Much has been written about deterrence, the process of committing to punish an adversary to prevent an attack. But in sufficiently rich environments where attacks evolve over time, formulating a strategy involves not only deterrence but also appeasement, the less costly process of not responding...

More advanced technologies demand higher degrees of specialization - and longer chains of production connecting raw inputs to final outputs. Longer production chains are subject to a "weakest link" effect: they are more fragile and more prone to failure. Optimal chain length is determined by the...

A model of security design based on the principle of information aggregation and alignment is used to show that (i) firms needing to finance their operations should issue different securities to different groups of investors in order to aggregate their disparate information and (ii) each...

When considering the incentive of a monopolist to adopt an innovation, the textbook model assumes that it can instantaneously and seamlessly introduce the new technology. In fact, firms often face major problems in integrating new technologies. In some cases, firms have to (temporarily) produce...

Intellectual property (IP) protection involves a trade-off between the undesirability of monopoly and the desirable encouragement of creation and innovation. Optimal policy depends on the quantitative strength of these two forces. We give a quantitative assessment of current IP policies. We...

Typical models of bankruptcy and collateral rely on incomplete asset markets. In fact, bankruptcy and collateral add contingencies to asset markets. In some models, these contingencies can be used by consumers to achieve the same equilibrium allocations as in models with complete markets. In...

In a model of evolution driven by conflict between societies more powerful states have an advantage. When the influence of outsiders is small we show that this results in a tendency to hegemony. In a simple example in which institutions differ in their "exclusiveness" we find that these...