The soft budget constraint syndrome, first identified and studied by Janos Kornai, arises when a seemingly unprofitable enterprise is bailed out by the government or the enterprise's creditors. In other words, the enterprise is not held to a fixed budget, but finds its budget constraint...

We study a model where capacity installation by an incumbent firm serves to deter others from entering the industry. We argue that uncertainty about demand or costs forces the incumbent to choose a higher capacity level than it would under certainty. This higher level diminishes the...

Auctions, normally considered as devices facilitating trade, also provide a way to probe mechanisms governing one's valuation of some good or action. One of the most intriguing phenomena in auction behavior is the winner's curse - the strong tendency of participants to bid more than rational...

We model organization as the command-and-communication network of managers erected on top of technology (which is modeled as a collection of plants). In our framework, the role of a manager is to deal with shocks that affect the plants that he oversees directly or indirectly. Organizational form...

There is a voluminous theoretical literature on sealed high-bid auctions (auctions in which bids are sealed and the high bidder pays his bid). See for example, Vickery (1961), Myerson (1981), riley and Samuelson (1981), Milgrom and Weber (1982), Mathews (1983), Maskin and Riley (1984),...

The revenue-equivalence theorm for auctions predicts that expected seller revenue is independent of the bidding rules, as long as equilibrium has the properties that the buyer with the highest reservation price wins and any buyer with the lowest possible reservation price has zero expected...

We scrutinize the conceptual framework commonly used in the incomplete contract literature. This literature usually assumes that contractual incompleteness is due to the transaction costs of describing - or of even foreseeing - the possible states of nature in advance. We argue, however, that...

This paper surveys the theoretical literature on the effect of soft budget constraints on economies in transition from centralization to capitalism; it also reviews our understanding of soft budget constraints in general. It focuses on the conception of the soft budget constraint syndrome as a...

We review theoretical work studying the effect of soft budget constraints (SBC) on economies in transition from centralization to capitalism. We also examine the connection of SBC to corporate finance, banking, and financial crises