We study a Bertrand game where two sellers supplying products of different and unverifiable qualities can outwit potential clients through (costly) deceptive advertising. We characterize a class of pooling equilibria where sellers post the same price regardless of their quality and low quality...

We study a supply chain model where competing manufacturers located around a circle contract with privately informed and exclusive retailers. The number of brands in the market (determined by the manufacturers’ zero profit condition) depends on the level of asymmetric information within supply...

We study a model of financial advice where investors rely on a financial expert (the advisor) to make their asset allocation choices. There is only one source of risk and the advisor is privately informed about the volatility of the return of the risky asset. Moreover, the advisor’s...

We propose a theory of anticompetitive effects of debt finance based on the interaction between capital structure, managerial incentives, and firms ability to sustain collusive agreements. Shareholders' commitments not to expropriate debtholders through managers with valuable reputations or...

When do principals independently choose to share the information obtained from their privately informed agents? Information sharing affects contracting within competing organizations and induces agents’ strategies to be correlated through the distortions imposed by principals to obtain...

Motivated by the recent experimental evidence on altruistic behavior, we study a simple principal-agent model where each player cares about other players’ utility, and may reciprocate their attitude towards him. We show that, relative to the selfish benchmark, efficiency improves when players...

A large body of theoretical literature suggests that capital structure plays an important role as a managerial incentive mechanism. What of the evidence for the agency approach? Cross-sectional empirical studies have identified a positive effect of leverage on expected performance (measured by...

When a customer can borrow from several competing banks, multiple lending raises default risk. If creditor rights are poorly protected, this contractual externality can generate novel equilibria with strategic default and rationing, in addition to equilibria with excessive lending or...

We develop an agency model of organized crime accounting for the main trade-offs involved by the introduction of an accomplice-witness program. We characterize the optimal policy and identify its main determinants in a framework where public officials can be dishonest. Our predictions are tested...

Motivated by the recent experimental evidence on altruistic behavior, we study a simple principal–agent model where each player cares about other players' utility, and may reciprocate their attitude towards him. We show that, relative to the selfish benchmark, efficiency improves when players...