Why are contracts incomplete? Transaction costs and bounded rationality cannot be a total explanation since states of the world are often describable, foreseeable, and yet are not mentioned in a contract. Asymmetric information theories also have limitations. We offer an explanation based on...

Why are contracts incomplete? Transaction costs and bounded rationality cannot be a total explanation since states of the world are often describable, foreseeable, and yet are not mentioned in a contract. Asymmetric information theories also have limitations. We offer an explanation based on...

We show that joint ownership (partnership or joint venture) can implement first best in a twice-repeated game when each agent believes that the other party is honest with a very small probability. In the final period the ownership structure is renegotiated because joint ownership is ex post...

This paper is concerned with what the state buys and in particular the decision to shift from the purchase of assets toward final services, leaving the design, build and ownership to those who commit to supply the service. The approach emphasises the information and contractual nature of the...

We analyze allocation of foreign aid to different sectors in a recipient developing country. Donors tend to favor social sectors over other public expenditure programs. Due to incomplete information the donors may concentrate too much on the priority sectors leaving the lower priority, yet...

Focus - specialization and specific technology - improves productivity but leads to more dependency and opens a door for power problems. We analyze how organizational design and the choice of technology interact with the allocation of ownership in minimizing the holdup problem. We find a novel...