Even for fully equity-financed firms there may be substantial effects of taxation on the after-tax cost of capital. Among the few studies of these effects, even fewer identify all effects correctly. When marginal investment is taxed together with inframarginal, marginal beta differs from average...

Discounting in the presence of catastrophic risk is a hotly debated issue, in particular with respect to climate change. Many scientists and laymen concerned with potentially catastrophic impacts feel that if an increase in the discount rate drastically increases the likelihood of catastrophic...

I consider a society with heterogeneous individuals who can form organizations for the production of a differentiated service. An arrangement of organizations is said to be split up stable when there is no majority to split any of the organizations. Unlike other equilibrium concepts in the...

This paper analyses the default option typical to American mortgages. Households borrow to buy durable housing, but future house prices are uncertain, and households find it dvantageous to default on their debt if house prices fall sufficiently. A key assumption of the model is that households...

Climate mitigation policy should be imposed over a long period, and spur development of new technologies in order to make stabilization of green house gas concentrations economically feasible. The government may announce current and future policy packages that stimulate current R&D in...

An entrepreneur with information about firm quality seeks financing from an uninformed investor in order to pay a worker. I show that if the worker, too, knows the true quality of the firm, then certain long term wage agreements can credibly signal firm quality. Such wage agreements have a low...

We set up a sequential merger game to study a firm's incentives to pass up on an opportunity to merge with another firm. We find that such incentives may exist when there are efficiency gains from a merger, firms are of different sizes, there is an antitrust authority present to approve mergers,...

The topic of this note is issues related to R&D expenditures leading to improved technologies for reducing environmentally harmful emissions. The focus is on he following questions: Will a market economy where environmental policies are restricted to taxes or quotas give the socially efficient...