We develop a new bankruptcy procedure that makes use of multiple auctions. The procedure" is designed to work even when capital markets do not function well (for example in developing" economies, or in economies in transition) -- although it can be used in all economies."

In the last few years a new area has emerged in economic theory, which goes under the heading of However, almost since its inception, the theory has been under attack for its lack of rigorous foundations. In this paper, we evaluate some of the criticisms that have been made of the theory, in...

Consider an entrepreneur who needs to raise funds from an investor, but cannot commit not to withdraw his human capital from the project. The possibility of a default or quit puts an upper bound on the total future indebtedness from the entrepreneur to the investor at any date. We characterize...

This paper is a contribution to the growing literature on constrained inefficiencies in economies with financial frictions. The purpose is to present two simple examples, inspired by the stochastic models in Gersbach-Rochet (2012) and Lorenzoni (2008), of deterministic environments in which such...

This paper is an investigation into the dynamics of asset markets with adverse selection a la Akerlof (1970). The particular question asked is: can market failure at some later date precipitate market failure at an earlier date? The answer is yes: there can be "contagious illiquidity" from the...

This paper presents a model of a self-fulfilling price cycle in an asset market. Price oscillates deterministically even though the underlying environment is stationary. The mechanism that we uncover is driven by endogenous variation in the investment horizons of the different market...

This paper provides a framework for addressing the question of when transactions should be carried out within a firm and when through the market. Following Grossman and Hart, we identify a firm with the assets that its owners control. We argue that the crucial difference for party 1 between...