A liquidity-constrained entrepreneur needs to raise capital to finance a business activity that may cause injuries to third parties - the tort victims. Taking the level of borrowing as fixed, the entrepreneur finances the activity with senior (secured) debt in order to shield assets from the...

Section 365 of the Bankruptcy Code prohibits enforcement of the once common quot;ipso factoquot; clause.quot; The clause excuses the solvent party from performance of the contract when the other party becomes insolvent. We show that the ability of insolvent firms to continue bad projects is...

We study alternative methods of assigning scarce resources to individuals who may be liquidity-constrained. Selling the resources via auctions is increasingly popular, but that method may produce an inefficient allocation when agents are liquidity constrained. A simple non-market scheme such as...

Peter DeMarzo, Ilan Kremer and Andrzej Skrzypacz (2005, henceforth DKS) analyzed auctions in which bidders compete in securities. They show that a steeper security leads to a higher expected revenue for the seller, and also use this to establish the revenue ranking between standard auctions. In...

We study an optimal collusion-proof auction in an environment where subsets of bidders may collude not just on their bids but also on their participation. Despite their ability to collude on participation, informational asymmetry facing the potential colluders can be exploited significantly to...

We study an optimal collusion-proof auction in an environment where subsets of bidders may collude not just on their bids but also on their participation. Despite their ability to collude on participation, informational asymmetry facing the potential colluders can be exploited significantly to...

We study an optimal weak collusion-proof auction in an environment where a subset (or subsets) of bidders may collude not just on their bids but also on their participation. Despite their ability to collude on participation, informational asymmetry facing the potential colluders can be exploited...