This paper analyzes the design of innovation contests when the quality of an innovation depends on the research approach of the supplier, but the best approach is unknown. Diversity of approaches is desirable because it generates an option value. In our main model with two suppliers, the buyer...

This paper analyzes the design of innovation contests when the quality of an innovation depends on the research approach of the supplier, but the best approach is unknown. Diversity of approaches is beneficial because of the resulting option value. An auction induces the social optimum, while a...

This paper analyzes the design of innovation contests when the quality of an innovation depends on the research approach, but the best approach is unknown. Inducing a variety of research approaches generates an option value. We show that suitable contests can induce such variety. The...

This paper analyzes the design of innovation contests when the quality of an innovation depends on the research approach, but the best approach is unknown. Inducing a variety of research approaches is desirable because it generates an option value. We show that suitable contests can induce such...

This paper investigates why all-inclusive travel packages are offered at some hotels but not at others. By using the theory of transaction cost, it is argued that all-inclusive contracts mitigate a hold-up problem and that the severity of this problem varies with regards to the hotel's distance...

This paper provides a theoretical rationale for non-binding retail price recommendations (RPRs) in vertical supply relations. Analyzing a bilateral manufacturer-retailer relationship with repeated trade, we show that linear relational contracts can implement the surplusmaximizing outcome. If the...

In the economic literature on market competition, firms are often modelled as individual decision makers and the internal organization of the firm is neglected (unitary player assumption). However, as the literature on strategic delegation suggests, one can not generally expect that the behavior...

The make-or-buy decision is analyzed in a three-layer principal-management-agent model. There is a cost-saving/quality tradeoff in effort provision. The principal faces the choice between employing an in-house management and contracting with an independent management; the cost-saving incentives...

The make-or-buy decision is analyzed in a simple framework combining contractual incompleteness with the existence of imperfect but contractible performance measures. Contractual incompleteness gives rise to two regimes, identified with make and buy. The performance measure on which...

Collaboration in teams in which each member's output is critical to the overall success present organizations with difficult coordination problems. We develop a model and run simulations to analyze how costly communication affects team coordination and output efficiency. We show that absent any...