In this paper it is demonstrated that voluntary bargaining over a collective decision under asymmetric information may well lead to ex post efficiency if the default decision is non-trivial. It is argued that the default decision may be interpreted as a 'simple' contract that the parties have...

In many capital-intensive markets, sellers sign long-term contracts with buyers before committing to sunk cost investments. Ex-ante contracts mitigate the risk of under-investment arising from ex-post bargaining. However, contractual rigidities reduce the ability of firms to respond flexibly to...

In this paper, a formal rent-seeking theory of the firm is developed. The main idea is that integration (compared to non-integration) facilitates rent-seeking for the integrating party, but makes it harder for the integrated one. In a one-period model, this implies that the rent-seeking contest...

This paper argues that academics, politicians, and the media have six commonly held but misguided beliefs about corporate governance. While Armstrong, Guay, and Weber (2010) discuss some of these misconceptions, a wider recognition that these beliefs are actually “myths” is important. They...

Can formal contracts help resolving the holdup problem? We address this important question by studying the holdup problem in repeated transactions between a seller and a buyer in which the seller can make relation-specific investments in each period. In contrast to previous findings, we...

The rise of the network as a form of economic organization renders problematic our standard understanding of how capitalism is governed. As the governance of production shifts from vertical integration to horizontal contract, a puzzle arises: how do contracts, presumed to be susceptible to...

Firm integration is fundamentally shaped by contractual frictions. But do better contracting institutions, reducing these frictions, induce firms to be more or less deeply integrated? To address this question, this paper exploits unique micro data on ownership shares across more than 200,000...

Effective organizations are able not only to coordinate their members on efficient strategies but also to adapt members' strategies to unforeseen change in an efficient manner. We explore whether part of organizational culture - namely, relational contracts that facilitate both coordination and...

Contract today increasingly links entrepreneurial innovations to the efforts and finance necessary to transform ideas into value. In this Chapter, we describe the match between a form of contract that "braids" formal and informal contractual elements in novel ways and the process by which...

Incumbent firms, especially in high-tech industries, often contract and collaborate with small research units on single projects. A delicate resulting contracting decision thus is how to allocate control. This paper considers the incumbent's problem to design a research contract that specifies:...