In the paper the trade-offs among endogenous transaction costs caused by two-sided moral hazard, exogenous monitoring cost, and economies of specialization are specified in a Grossman, Hart, and Moore (GHM) model to absorb Maskin and Tirole's recent critique and Holmstrom and Milgrom's criticism...

In the Grossman-Hart-Moore property rights approach to the theory of the firm, it is usually assumed that information is symmetric. Ownership matters for investment incentives, provided that investments are partly relationship-specific. We study the case of completely relationship-specific...

In this paper we address the question of collusion in mechanisms under asymmetric information. We develop a methodology to analyze collusion as an informed principal problem. First, if collusion occurs after the agents accept or reject the principal's offer, the dominant-strategy implementation...

Using a unique employee-establishment matched survey, we find a causal relationship between an individual employee's trust of management and the delegation of real authority. We utilize both fixed effects and instrumental variables to control for unobserved factors: establishment-level fixed...

This paper analyzes delegation and joint decision making in an environment with private information and partially aligned preferences. We compare the benefits of these two decision making procedures as well as the interaction between them. We give a condition under which delegation is preferred...

This paper investigates how information uncertainty, measured through variation in the informativeness of the public information environment, shapes the organizational design choices of firms. I posit that, when faced with higher uncertainty about demand and supply, managers are more likely to...

"Implicit Contracts, incentive compatibility, and involuntary unemployment" (MacLeod and Malcomson, 1989) remains our most highly cited work. We briefly review the development of this paper and of our subsequent related work, and conclude with reflections on the future of relational contract...

We study an organization, consisting of a manager and a worker, whose success depends on its ability to estimate a payoff-relevant but unknown parameter. If the manager has private information about this parameter, she has an incentive to conceal it from the worker in order to motivate him to...

Recognizing spam as a pollution problem points to a market-based approach that could be more effective than prior approaches based on either technology or law. Combining insights from externality economics and information asymmetry, I argue that an imperfect market can create more value for...

This paper characterizes the optimal contract when a principal has unverifiable subjective information that is correlated with an agent's private information. We find that the principal's subjective information alleviates the initial information asymmetry only if the correlation is sufficiently...