The paper develops a theory of costly communication in which the sender's and receiver's motivations and abilities endogenously determine the communication mode and the transfer of knowledge. Communication is modeled as a problem of moral hazard in teams, in which the sender and receiver select...

One of the main decisions facing firms is that of a choice of a capital structure, and in particular the choice of debt versus equity. Models where capital structure matters have focused either on the incentive approach, where agency problems stemming from the separation between ownership and...

The authors present a model of large-scale economic reforms, modeled on the transition process in Eastern Europe, with aggregate and individual uncertainty concerning the outcome of reforms. The government is assumed to choose the speed and sequencing of reforms. The authors compare big-bang...

This paper shows how the optimal financial structure of a firm complements incentive schemes to discipline managers, and how the securities' return streams determine the claimholders' incentives to intervene in management. The theory rationalizes (1) the multiplicity of securities, (2) the...

We present a model of large-scale economic reforms, modelled on the transition process in Eastern Europe, with aggregate and individual uncertainty concerning the outcome of reforms. The government is assumed to choose the speed and sequencing of reforms. We compare `big bang' strategies with...

This is the third of three volumes containing edited versions of papers and commentaries presented in invited symposium sessions of the Eighth World Congress of the Econometric Society. The papers summarize and interpret recent key developments and discuss future directions in a wide range of...