We analyze the two-bidder discriminatory auction with downward sloping marginal valuations and a continuous, variable award. We allow for a common component in marginal valuations and affiliation. We focus on problems that admit solutions with strictly downward sloping bidding schedules. Using...

We develop a model of a two-division firm in which the “strong†division has,on average, higher quality investment projects than the “weak†division. We show that the firm optimally biases its project selection policy in favor of the weak division and this bias is stronger...

We derive equilibrium bidding strategies in divisible good auctions for asymmetrically informed risk neutral and risk averse bidders when there is random noncompetitive demand. The equilibrium bid schedules contain both strategic considerations and explicit allowances for the winner's curse....

A firm can merge with one of n potential partners. The owner of each firm has private information about both his firm’s stand-alone value and a component of the synergies that would be realized by the merger involving his firm. We characterize incentive-efficient mechanisms in two cases....

We characterize incentive-efficient merger outcomes when payments can be made both in cash and stock. Each firm has private information about both its stand-alone value and a component of the (possibly negative) potential synergies. We study two cases: when transfers can, and cannot, be made...

This paper develops a dynamic model of the capital structure based on the need to collateralize loans with tangible assets. The model provides a unified theory of optimal firm financing in terms of the optimal capital structure, investment, leasing, and risk management policy. Tangible assets...

We study whether borrowers optimally conserve debt capacity to take advantage of investment opportunities due to temporarily low asset prices, when financing is subject to collateral constraints due to limited enforcement. We find that borrowers may exhaust their debt capacity and thus may be...

Both financing and risk management involve promises to pay that need to be collateralized, resulting in a financing versus risk management trade-off. We study this trade-off in a dynamic model of commodity price risk management and show that risk management is limited and that more financially...