We propose a theory of ex post inefficient renegotiation that is based on loss aversion. When two parties write a long …-term contract that has to be renegotiated after the realization of the state of the world, they take the initial contract as a … renegotiated outcome sticky and materially inefficient. The theory has important implications for the optimal design of long …

underlying state of the world (the basic propability of high downstream prices, or the type of the firm), optimal regulation uses …

of the world economy that can be explained by incorporating the theory of the firm into the theory of international trade …What insights can be gained from bringing the theory of the firm to the global economy? I discuss several new features …

function adjusted to account for the heterogeneity of claims and the time dependence suggested by theory. Statistical tests are …