We view the court system as an institution that enables defendants to signal their innocence or guilt, and we examine how the court can optimally minimize expected social losses from errors of type I and type II and from expenditures by defendants. Two of the policy instruments assumed available...

Bilateral contracts, while neither negotiated nor enforced in an integrated way, are nevertheless often interrelated both economically and strategically owing to production or consumption complementarities and to asymmetric information. A set of bilateral contracts forms a mechanism with special...

We show how costless, nonbinding, nonverifiable communication (cheap talk) can achieve partial coordination among potential entrants into a natural-monopoly industry, where the payoffs are qualitatively like the "battle of the sexes." The analysis would apply equally in other economic situations...

This article presents a model in which licensing competitors expands demand for a new proprietary product and, therefore, may be a profit-maximizing strategy for the licensor even when licensing increases industry cost. In the model buyers care about price and quality, sellers can contract on...

We present an empirical model of households' choices among local telephone service options (for example, between flat-rate and measured service) and the interrelation of these choices with the number and average duration of local calls households make at each time of day to each geographical...

As regulators continue to open utility markets to entry, new market contestants may specialize in providing service for the utility's largest customers. Consequently, old utility pricing procedures may no longer be sustainable. Taking telecommunications regulation as an example, this article...

Previous calculations of the costs of railroad rate regulation assumed that deregulation would lower railroad rate levels and allow railroads to capture significant amounts of traffic from other modes of transportation. This article presents empirical results that show that neither of these...

We examine investment by firms in 24 chemical product industries to determine whether firms invest preemptively to achieve persistent increases in market share or whether there is evidence of behavior to maintain market share. The data indicate that investment reduces the probability that rival...

This article sets out a theory of market structure with sequential entry. We characterize the perfect Nash equilibrium to the entry game in several propositions. First, equilibria never involve excess capacity. Second, a sufficient statistic for the entry of any firm is that its profits are...

Under the system of hospital reimbursement for Medicare patients, hospitals receive a prospectively determined price that varies according to the diagnosis related group (DRG) to which the patient is assigned. Rate-setting by DRG encourages hospitals to specialize in those DRGs for which they...