In most contemporary economies loan contracts that mandate exclusionary penalties such as imprisonment or other non-pecuniary punishments for defaulting debtors are illegal, despite the fact that in some cases contracting parties might gain by being able to use them. A possible rationale for...

We study how the internal organization of firms — specifically, the allocation of ownership of assets and the distribution of profit among the firm’s managers — is determined in a competitive market. We ask how scarcity of assets, skills or liquidity in the market translates into ownership...

We consider an endogenous growth model in which appropriate organization fosters innovation, but because of contractibility problems, this benefit cannot be internalized. The organizational design element we focus on is the division of labor, which as Adam Smith argued, facilitates invention by...

Mobility depends essentially on investment, which often occurs in environments in which individuals match (school) or will match after investing (the labor market). Where partners can transfer surplus to each other only imperfectly (NTU), the pattern of matching will typically be inefficient,...

We embed a simple incomplete-contracts model of organization design in a standard two-country, perfectly-competitive trade model to examine how the liberalization of product and factor markets affects the ownership structure of firms. In our model, managers decide whether or not to integrate...

We develop a tractable model of the allocation of control in firms in competitive markets, which permits us to study how changes in the scarcity of assets, skills or liquidity in the market translate into control inside the organization. Firms will be more integrated when the terms of trade are...

We construct a price-theoretic model of integration decisions and show that these choices may adversely affect consumers, even in the absence of monopoly power in supply and product markets. Integration is costly to implement but is effective at coordinating production decisions. The price of...