This paper attempts to provide a substantive introduction to behavioral economics for a general audience, and for introductory and intermediate level students of economics and business administration. 1. Introduction; 2. The Background; 3. Bounded Rationality; 4. Prospect Theory and other major...

We experimentally examine determinants of the transferability and durability of an assurer's flagship-service reputation for competence in a multi-service context. Economic and psychology theories agree that transferability will increase when a new service and a flagship service require...

This paper studies the design of law-making and law enforcement institutions based on the premise that law is inherently incomplete. Under incomplete law, law enforcement by courts may suffer from deterrence failure, defined as the social-welfare loss that results from the regime's inability to...

We study an economy where agents are heterogeneous in terms of observable wealth and unobservable talent. Adverse selection forces creditors to ask for collateral. We study the two-way interaction between rationing in the credit market and the wages offered in the labour market. Both pooling and...

We study how securities and trading mechanisms can be designed to optimally mitigate the adverse impact of market imperfections on liquidity. Asset owners seek to obtain liquidity by selling their claims on future cash-flows, on which they have private information. Our analysis encompasses both...

We study the decision of when to invest in an indivisible project whose value is perfectly observable but driven by a parameter that is unknown to the decision maker ex ante. This problem is equivalent to an optimal stopping problem for a bivariate Markov process. Using filtering and martingale...

We develop a model of hierarchies based on the allocation of authority. A firm's owners have ultimate authority over a firm's decisions, but they have limited time or capacity to exercise this authority. Hence owners must delegate authority to subordinates. However, these subordinates also have...

We show that allocation of ownership matters even in a long-term relationship where problems of opportunism are less severe unless agents are very patient. Ownership structure is chosen to give the agents best incentives to cooperate. The optimal control structure of the static game restricts...

This paper analyses optimal irreversible investment policy when profits are subject to a multiplicative geometric Brownian motion shock. The marginal product of capital is increasing initially and decreasing thereafter. In the latter range, optimal policy is familiar: capacity is added gradually...

Transaction Byte Analysis (TBA) is introduced as a basis to ground corporate governance in the science of information and control described as cybernetics. TBA provides fundamental criteria for evaluating the governance integrity of any type of organisation because all individuals possess...