This paper considers the implications of relationship-specific investment within keiretsu for policies aimed at opening the Japanese market for intermediate goods, such as auto parts. Both VIEs applied to parts and VERs restricting Japanese exports of autos cause the keiretsu to import a wider...

This paper develops a model of informal procurement within Japanese keiretsu so as to consider effects on intermediate-good imports, such as auto parts. Parts-suppliers make relationship-specific investments that benefit the auto-maker and prices are determined by bargaining after investment has...

We examine how the U.S. Federal Government governs R&D contracts with private-sector firms. The government chooses between two contractual forms: grants and cooperative agreements. The latter provides the government substantially greater discretion over, and monitoring of, project progress....

In a search model, prospects encounter salespeople who can try to persuade them. Persuasive messages can increase the utility of buying or increase the cost of not buying. The latter reduces welfare. Equilibria where only some salespeople make a persuasive effort often exist. Salespeople vary in...

Why do developing countries fail to specialize in products in which they appear to have a comparative advantage? We propose a model of agricultural trade with intermediation that explains how hold-up resulting from poor contracting environments can produce such an outcome. We use the model to...

We analyze a model where investors use a credit rating to decide whether to finance a firm. The rating quality depends on unobservable effort exerted by a credit rating agency (CRA). We study optimal compensation schemes for the CRA when a planner, the firm, or investors order the rating. Rating...

Firms spend substantial resources on marketing and selling. Interpreting this as evidence of frictions in product markets, which require firms to spend resources on customer acquisition, this paper develops a search theoretic model of firm dynamics in frictional product markets. Introducing...