We are concerned with the design of a constitution for a firm an ex ante contract which assigns residual rights of control (and possibly residual Income rights) without reference to the issue to be decided. We focus attention on two polar constitutions: nonprofit cooperatives and outside...

This paper is a theoretical study into how credit constraints interact with aggregate economic activity over the business cycle. We construct a model of a dynamic economy in which lenders cannot force borrowers to repay their debts unless the debts are secured. In such an economy, durable assets...

The authors construct a model of a dynamic economy in which lenders cannot force borrowers to repay their debts unless the debts are secured. In such an economy, durable assets play a dual role: not only are they factors of production but they also serve as collateral for loans. The dynamic...

We broadly define liquid assets, or monetary assets, as any asset that can be readily sold in the market and can be held by a number of people in succession before maturity. We ask in what environment is the circulation of liquid assets essential for the smooth running of the economy. By...

We analyze the role of debt in persuading an entrepreneur to pay out cash flows, rather than to divert them. In the first part of the paper we study the optimal debt contract-specifically, the trade-off between the size of the loan and the repayment-under the assumption that some debt contract...

We are concerned with the design of a constitution for a firm - an ex-ante contract which assigns residual rights of control (and possibly residual income rights) without reference to the issue to be decided. We focus attention on two polar constitutions: nonprofit cooperatives and outside...

We view a contract as a list of outcomes. Ex ante, the parties commit not to consider outcomes not on the list, i.e., these are “ruled out”. Ex post, they freely bargain over outcomes on the list, i.e., the contract specifies no mechanism to structure their choice; in this sense outcomes on...

This paper examines the use of stage mechanisms in implementation problems and provides a partial characterization of the set of subgam e perfect implementable choice rules. It is shown that, in many economic environments, virtually an y choice rule can be implemented. To illustrate the power of...