If ownership and control are separated, leaving the manager with discretion may be of value. This paper discusses the extent to which a firm's ownership structure may serve as a commitment for shareholders not to interfere with the manager's project decisions, thereby reducing the agency cost of...

We present a model where an incumbent firm raises its price in response to increasing competition. It may pay the incumbent to exploit a rather immobile fraction of consumers instead of capturing a larger but more contested segment of the market. In particular, we apply our results to deregulation.

This paper considers a competitive search market where sellers have private information about a good's quality. It is shown that separation of types may arise naturally if high-quality sellers derive a greater utility from search than low-quality sellers. For instance, sellers of high-quality...

In a seminal paper, Rothschild and Stiglitz (1976) show that competitive markets with incomplete information in which firms offer contracts to screen privately informed agents may have no equilibrium. In this paper, we argue that frictions in the form of delay or congestion provide a natural...

We analyze bilateral bargaining with one-sided offers where the buyer has private information about his valuation but does not know whether the seller is committed to a known fixed price or whether it pays to hold out until he possibly reduces his offer. We make the `gap' assumption that there...

We consider bargaining between a seller and a buyer with private information about his valuation. We introduce the novel feature that with some probability a new buyer may visit the seller's shop each period, which grants the seller the option to switch to a new trading partner. We analyze the...

In an internal capital market, individual departments may compete for a share of the firm's budget by engaging in wasteful influence activities. We show that firms with more levels of hierarchy may experience lower influence costs than less hierarchical firms, even though the former provide more...

This paper presents a theory of integration based on the inability of parties to write comprehensive financial contracts. In our model, integration entails both benefits and costs. On the one hand, integration involves liquidity spillovers between projects ensuring that integrated firms can...

We consider a game of signaling where the informed sender proposes a contract, which can only be accepted or rejected by the receiver. While most of the literature considers a bilaterally monopolistic setting, we embed the game in a search market environment where a sender may switch to another...

We consider a competitive search equilibrium where firms' publicly observable wage offers lead to the formation of independent submarkets. While in the benchmark case workers' productivities can be verified at a distance, our main analysis concerns the case of adverse selection where workers can...