Section 365 of the Bankruptcy Code prohibits enforcement of the once common "ipso facto" clause." The clause excuses the solvent party from performance of the contract when the other party becomes insolvent. We show that the ability of insolvent firms to continue bad projects is enhanced by the...

We study an optimal collusion-proof auction in an environment where subsets of bidders may collude not just on their bids but also on their participation. Despite their ability to collude on participation, informational asymmetry facing the potential colluders can be exploited significantly to...

State public utility commissions in the United States have implemented incentive regulations to promote the operating efficiency of nuclear power plants. This paper surveys these incentive programs, focusing on the perfomance-based pricing approach. Our findings suggest that the...

A liquidity-constrained entrepreneur needs to raise capital to finance a business activity that may cause injuries to third parties -- the tort victims. Taking the level of borrowing as fixed, the entrepreneur finances the activity with senior (secured) debt in order to shield assets from the...

This paper studies the economic rationale for customer return policies by focusing on the 'experience goods' aspect of many products. Return policies allow consumers to defer their purchasing decisions until after they gain some experience with goods. In so doing, they insure consumers against...