One of the basic assumptions of standard economic theory is that individuals' behavior is solely guided by the quest for the highest possible material outcome. However, there is ample evidence of additional factors influencing individuals' behavior as well. Besides individual-specific factors,...

We show how the prospect of disputes over firms' revenue reports promotes debt financing over equity. This is demonstrated in a costly state verification model with a risk averse entrepreneur. The prospect of disputes encourages incentive contracts that limit penalties and avoid stochastic...

We show how the prospect of disputes over firms' revenue reports promotes debt financing over equity. These findings are presented within a costly state verification model with a risk averse entrepreneur. The prospect of disputes encourages incentive contracts that limit penalties and avoid...

This thesis consists of three independent contributions in the area of microeconomic theory. All three contributions share the feature of agents holding multidimensional private information which motivates the title of the thesis. Part 1, entitled “Consistency and Communication in...