It is typically less profitable for an opportunistic borrower to divert inputs than to divert cash. Therefore, suppliers may lend more liberally than banks. This simple argument is at the core of our contract theoretic model of trade credit in competitive markets. The model implies that trade...

Countertrade - or reciprocal buying - is defined as a transaction involving (at least) a two-way transfer of goods, rather than a singular transfer of goods for money. The main objective of this paper is to explain the extensive use of countertrade both between countries and between firms within...

The paper discusses the reasons for supporting international trade finance during a liquidity crisis. Targeted interventions are justified when prices are rigid and sellers insist on immediate payment due to fears of strategic default. In this case, buyers who reject the seller's offer fail to...

Does voluntary contracting suffice for the efficient provision of excludable public goods? Even in a complete information environment, we find that the answer is negative. The reason is that some agents may profit from not participating at the provision stage, but instead negotiate access ex post

If individuals own the right to take any action that they please, and are free to contract about behavior, will outcomes be efficient in all situations? That is, does the Coase theorem hold? We study this classic question through the lens of a non-cooperative model of contract negotiations,...

Mandated countertrade is a policy to restrict unilateral imports. A country's government thereby in effect commits domestic firms not to purchase from a foreign trading partner unless there are reciprocal sales. We argue that the policy may be a rational response to fundamental contracting...

We study 52 million trade credit contracts, issued by 51 suppliers over 9 years to about 199,000 unique customers. The data contain information on contract size, due dates, actual time to payment, and firm characteristics. Our empirical analysis contradicts the conventional view that trade...

The paper discusses the reasons for supporting international trade finance during a liquidity crisis. Targeted interventions are justified when prices are rigid and sellers insist on immediate payment due to fears of strategic default. In this case, buyers who reject the seller's offer fail to...

Within a simple formal model, we show that there is a link between workers' consumption patterns and their preferred real wage. A large budget share of illiquid durable consumption goods (such as houses and cars) makes workers more willing to accept a low wage in order to reduce the probability...