Capacity addition and withdrawal decisions are among the most important strategic decisions made by firms in oligopolistic industries. In this paper, we develop and analyze a fully dynamic model of an oligopolistic industry with lumpy capacity and lumpy investment/disinvestment. We use our model...

The authors examine how market structure affects credit allocation under universal risk neutrality and asymmetric information about borrowers. They consider both monopolistic and perf ectly-competitive banks and examine the role of collateral in each ca se. When a bank is a monopolist on the...

Clemenz's 1993 comment criticizes our 1987 paper in two ways: first, a Nash equilibrium with rationing does not exist; second, allowing randomization across credit contracts changes the equilibrium from our 1987 paper. We respond as follows. First, our rationing equilibrium is a sequential...

This paper studies transfer prices and compensation mechanisms in a principal-agent model with moral hazard and private information by the agent. Production requires unobservable effort by the agent and a purchased input. In general, it is optimal for the principal to create an internal market...

The article analyzes a model of a regulated firm that is better informed about its cost function than is the regulator. By auditing at a cost, however, the regulator is assumed to be able to observe the realized cost of the firm. If the regulator "finds" that the firm had misrepresented its...

Optimal antitrust policy toward collusion to fix prices is examined in an asymmetric information setting. The antitrust authority does not know cartel costs and so cannot distinguish between a high-cost competitive industry and a low-cost cartel. The problem differs from principal-agent models...