We present insolvency practitioners from 88 countries with an identical case of a hotel about to default on its debt, and ask them to describe in detail how debt enforcement against this hotel will proceed in their countries. We use the data on time, cost, and the likely disposition of the...

It is often argued that competition in the product market reduces managerial slack. We formalize this idea. Suppose that there is a common component to firms' costs, i.e., as one firm's (total and marginal) costs fall, so do those of other firms. Then when costs fall, profit-maximizing firms...

Previous experimental work provides encouraging support for some of the central assumptions underlying Hart and Moore (2008)'s theory of contractual reference points. However, existing studies ignore realistic aspects of trading relationships such as informal agreements and ex post...

We study an economy where the lack of a simultaneous double coincidence of wants creates the need for a relatively safe asset (money). We show that, even in the absence of asymmetric information or an agency problem, the private provision of liquidity is inefficient. The reason is that liquidity...

We study the role of fiscal policy in a complete markets model where the only friction is the nonpledgeability of human capital. We show that the competitive equilibrium is constrained inefficient, leading to too little risky investment. We also show that fiscal policy following a large negative...