Large public bureaucracies are usually less efficient than modern private corporations. This paper explains how the degree of discretionary power might account for this difference in efficiency. In fact, increasing the discretionary power of the intermediate layers of an organization can enhance...

It has been argued that collusion among the members of an organization or a vertical structure creates efficiency losses, and hence should be prevented. This paper shows that whenever collusion takes the form of co-insurance agreements, here called `friendships', among the members of a vertical...

We develop a simple theoretical model of a long term buyer-supplier relationship with non-contractible buyer specific R&D investment, and derive predictions on the effects of trust and competition on suppliers’ investment and buyers’ procurement strategies. We address these issues...

It has been argued that collusion among the members of an organization or a vertical structure creates efficiency losses, and hence should be prevented. This paper shows that whenever collusion takes the form of co-insurance agreements, here called ?friendships?, among the members of a vertical...

This paper introduces two complementary models of firm-specific training: an informational model and a productivity-enhancement model. In both models, market provision of firm-specific training is inefficient. However, the nature of the inefficiency depends on the balance between the two key...

In this paper, we present a citizen-candidate model of representative democracy with endogenous lobbying. We find that lobbying induces policy compromise and always affects equilibrium policy outcomes. In particular, even though the policy preferences of lobbies are relatively extreme, lobbying...

The restructuring of a bankrupt company often entails its sale. This Paper suggests a way to sell the company that maximizes the creditors' proceeds. The key to this proposal is the option left to the creditors to retain a fraction of the shares of the company. Indeed, by retaining the minority...

The restructuring of a bankrupt company often entails a change of control. By efficiency of a bankruptcy procedure it is usually meant that the control is allocated into the hands of those who can maximize its value. In this paper we focus instead on how to allocate control with a procedure that...