This paper analyzes the issue of commitment in S. Grossman and O. Hart's model of optimal labor contracts under asymmetric information about firm profitability. The author extends his framework by allowing employment to vary over time, at equidistant intervals. When both parties can precommit ex...

This paper analyzes how organizations can minimize the costs of processing and communicating information. Communication is costly because it takes time for an agent to absorb new information sent by others. Agents can reduce this time by specializing in the processing of particular types of...

This paper shows how the optimal financial structure of a firm complements incentive schemes to discipline managers, and how the securities' return streams determine the claimholders' incentives to intervene in management. The theory rationalizes (1) the multiplicity of securities, (2) the...

This paper analyzes the relationship between the diffusion of new technologies and the decentralization of firms. Centralized control relies on the information of the principal, which we equate with publicly available information. Decentralized control, on the other hand, delegates authority to...

This paper investigates the relationship between product market competition and innovation. We find strong evidence of an inverted-U relationship using panel data. We develop a model where competition discourages laggard firms from innovating but encourages neck-and-neck firms to innovate....

This paper develops a simple macroeconomic model that shows that combining capital market imperfections together with unequal access to investment opportunities across individuals can generate endogenous and permanent fluctuations in aggregate GDP, investment, and interest rates. Reducing...

This paper analyzes the organization of the R&D activity in an incomplete contract framework. It provides theoretical foundations to understand how the allocation of property rights on innovations may affect both the frequency and the magnitude of these innovations; to rationalize commonly...

We consider the robustness of extensive form mechanisms to deviations from common knowledge about the state of nature, which we refer to as information perturbations. First, we show that even under arbitrarily small information perturbations the Moore-Repullo mechanism does not yield (even...

We document that, in a cross section of countries, government regulation is strongly negatively correlated with measures of trust. In a simple model explaining this correlation, distrust creates public demand for regulation, whereas regulation in turn discourages formation of trust, leading to...