When Court enforcement is excessively difficult or costly, agents are often able to create «endogenous enforcement mechanisms», that is, to design agreements so that each party finds it optimal to carry them out (self-enforcing implicit contracts), thanks to the threat of sanctions affecting...

The use of information plays an important role in the choice of transfer prices (TP). We discuss the information provision of two centralized mechanisms, namely, actual-cost and standard-cost based TP. Actual cost based TP use all available cost information whereas standard cost based TP only...

We study an incomplete contract model where both contracting parties can invest, and the investments have both self- and cross effects. We analyze the performance of non-contingent contracts, message games, option contracts and property rights. We find that the first best is implemented if (i)...

We develop a model of undescribable events. Examples of events that are well understood by economic agents but are prohibitively difficult to describe in advance abound in real-life. This notion has also pervaded a substantial amount of economic literature. We put forth a model of such events...

We study whether a firm that produces and sells access to an excludable public good should face a self-financing requirement, or, alternatively, receive subsidies that help to cover the cost of public-goods provision. The main result is that the desirability of a self-financing requirement is...

Fruit and vegetable marketing organization the Greenery has experienced various governance structure changes, like horizontal merger, forward integration, and the emergence of grower associations. A multilateral incomplete contracting model is presented to account for these changes by analysing...

We characterize the surplus-maximizing trading mechanism under two-sided incomplete information and interim individual rationality, when one party can make a value-enhancing specific investment. This mechanism exhibits a trade-off between providing investment incentives and inducing voluntary...

Economists often point out that regulations meant to correct market failure sometimes do more harm than good, in particular in developing countries. In this paper, I set up a field experiment to test this proposition in the Cape Town market for metered taxis. I find that if strictly enforced,...