In this paper, a model of environmental regulation with imperfect monitoring of emissions is presented. The regulator can use linear output taxes and emission taxes to influence the pollution level of a risk-averse firm. In contrast to the perfect monitoring case, a tax mix will usually be...

We study the economic consequences of opportunities for dishonesty in an environment where efficiency relevant behaviour is not contractible, but rather incentivized by informal agreements in an ongoing relationship. We document the repeated interaction between a principal and an agent who,...

We provide a framework for analyzing bilateral mergers when there is two-sided asymmetric information about firms’ types. We show that there is always a "no-merger" equilibrium where firms do not consent to a merger, irrespective of their type. There may also be a "cut-off" equilibrium if the...

We analyze a Bayesian merger game under two-sided asymmetric information about firm types. We show that the standard prediction of the lemons market model–if any, only low-type firms are traded–is likely to be misleading: Merger returns, i.e. the difference between pre- and post-merger...

We consider a setting in which two potential merger partners each possess private information pertaining both to the profitability of the merged entity and to stand-alone profits, and we investigate the extent to which this private information makes ex-post regret an unavoidable phenomenon in...