We develop a model of financial contracting under imperfect enforcement. Financial contracts are designed to keep entrepreneurs from diverting project returns, but enforcement is probabilistic and penalties are limited. The model rationalizes the prevalence of straight debt and common stock, and...

This paper examines the evolutionary foundations of bilateral bargaining behavior. Interaction is assumed to be personal in the sense that agents may recognize each others' bargaining strategies. In particular, the model allows interaction between 'obstinate' agents, whose demands are...