This article presents a static game theoretic model of a firm's decision to adopt a technological innovation of uncertain profitability. Given the levels of adoption costs, discount rates, and expectations regarding the profitability of the innovation, we determine the (Nash equilibrium) range...

Previous studies of litigation have sidestepped the strategic element in the decisions to file suit, and to settle or go to trial. This article develops a model of strategic behavior in litigation, which reveals how information is exploited and how the litigants' strategies are interdependent....

Do costs of coordination limit the size of firms? Do they lead to rising average costs at high output levels? A simple model of a firm which employs production and administrative labor, and where output is declining in coordination time by the latter, answers this question in two steps. First we...

This article examines the optimal strategy for a regulator who seeks to maximize expected consumers' surplus and who faces some uncertainty about the technological capabilities of the firm being regulated. It is shown that the optimal strategy will generally induce the firm to adopt a cost...

This article analyzes advertising in an n-firm infinite horizon, differentiated products oligopoly. The firms all choose output and advertising levels in each period, and are assumed to behave noncooperatively. Advertising is characterized in a manner similar to capital: the effects of money...

Book Review

We focus on two commonly observed insurance policy provisions: upper limits on coverage and deductibles. We suggest that upper limits on coverage result from the effective limited liability obtained through the bankruptcy statutes. We show that absent moral hazard, if the administrative cost...

We study the allocation of fixed costs to the outputs of a multiproduct firm. First we allocate short-run fixed costs through A-S prices which allocate the long-run costs. Long-run cost functions do not generally contain a fixed cost component. We show what part of the A-S prices associated with...

The expense-preference theory of the firm implies that in noncompetitive product markets, managers hire labor beyond the profit-maximizing level. This theory has recently received empirical support from Edwards (1977) and Hannan and Mavinga (1980). In this article it is shown that for...

This article shows that contracts which make workers' wages depend on their seniority level as well as their length of service can induce optimal turnover in the presence of transactions costs and investments in specific capital. Other arrangements which are shown to be inferior include Becker's...