If contracting within the firm is incomplete, managers will expend resources on trying to appropriate a share of the surplus that is generated. We show that outside ownership may alleviate the deadweight losses associated with such costly distributional conflict, even if all it does is add...

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...

This is a dictionary entry forthcoming in Peter Newman, ed. The New Palgrave Dictionary of Economics and the Law, London: Macmillan, 1998.

We consider Bayesian incentive compatible and individually rational mechanisms for resolving conflicts between two agents who are uncertain about each other's fighting potential. We model the default option of outright conflict as a probabilistic contest. Examples of such contests may be...

This is a dictionary entry forthcoming in Peter Newman, ed. The New Palgrave Dictionary of Economics and the Law, London: Macmillan, 1998.

This paper studies strategic delegation in two-player contests for an indivisible prize (as in, e.g. litigation) where one party's probability of winning is determined by the relative investments of both. Even though neither player stands to gain anything from the possibility of one player...

In a first-price all-pay auction buyers have an incentive to delegate the bidding to agents and to provide these agents with incentives to make bids that differ from the bids the buyers would like to make. Both buyers are better off in this strictly non-cooperative delegation equilibrium and the...

We consider a two-player contest for a prize of common but uncertain value. We show that less resources are spent in equilibrium if one party is privately informed about the value of the prize than if either both agents are informed or neither agent is informed. Furthermore, the uninformed agent...

We discuss attempts to justify conditional cooperation in the Prisoners’ Dilemma based on the idea of identifying an opponent’s strategy. We note that the concept of such complete transparency of decision procedures is logically inconsistent. Furthermore, we observe that attempts to justify...

We suggest an operational definition of transaction cost as the expected value of strategy information in games played by individuals randomly matched from a large population. We relate the concept of a transaction cost minimum to those of Nash equilibrium, efficiency, and evolutionary...