The prevailing view in the law and economics literature is that preventing firms and consumers from contracting out of mandatory liability rules is optimal only if consumers are irrational or misperceive the risks of the products they buy. In this paper, I show that even if consumers do...

The Coase Theorem suggests that married couples will divorce if and only if doing so increases their joint surplus, regardless of the legal rules governing divorce. This does not mean, however, that divorce laws only affect the distribution of rents. Because the distribution of rents affects...

In a recent article, Lyon and Rasmusen (2004) argue that buyer-option contracts are more effective at solving the holdup problem than has been previously recognized. This article examines the robustness of that claim to changes in the bargaining game they analyze and to changes in the nature of...

Under plausible circumstances, a monopolist in one market can use its control of prices in that market to force competing downstream buyers to sign tying contracts that will lever its monopoly into another market. Specifically, the monopolist of the tying good can place each downstream buyer in...

In the wake of a state-sponsored doping scandal, the World Anti-Doping Agency reommended banning all Russian athletes from the Rio Olympic Games. We study the circumstances in which such group penalties deter a group leader, whose payoff is tied to the group's benefits and sanctions, from...

We show that loyalty discounts create an externality among buyers because each buyer who signs a loyalty discount contract softens competition and raises prices for all buyers. This externality can enable an incumbent to use loyalty discounts to effectively divide the market with its rival and...

The influence of firms' ability to employ individualized pricing on the welfare consequences of horizontal mergers is examined in location models. In a two-to-one merger, the merger reduces consumer surplus more when firms can price discriminate based on individual preferences compared to when...

Most analyses of bargaining focus on the effect of exogenous asymmetric information about the gains from trade. This paper shows that, even with ex ante identical players, the ability to make unobservable preparations affecting the outcome of a conflict generates asymmetric information. This...