This paper considers lending to finance projects in a setting where repayment enforcement appears impossible. The loan was illegal and thus legally unenforceable. Creditors were incapable of applying private coercion to force repayment. Borrowers lacked both collateral and reputation capital....

We propose a security design model in which a potential acquirer approaches a firm with a value-add plan. The target has a single owner, who possesses private information: he knows whether his firm is compatible with the plan, or not. The seller agrees the acquirer will add value but not as much...

Uncompetitive contests for grades, promotions, retention, and job assignments, which feature lax standards and limited candidate pools, are often criticized for being unmeritocratic. We show that, when contestants are strategic, lax standards and exclusivity can make selection more meritocratic....

We analyze a bargaining game in which one party, called the buyer, is the active player and has the option of choosing the sequence of negotiations with other participants, called sellers. If the negotiations are public, the sellers who are negotiated with late in the sequence are in stronger...

Typically, shareholders are not sure whether boards act in their interest, or have been captured by management. They are also less well informed than boards about firm investment opportunities and operating conditions. We develop a model, consistent with these observations, in which...

This paper develops a new theory of the capital structure of parent--subsidiary organizations based on legal-system arbitrage: The capital structure of parent--subsidiary organizations is chosen to minimize the agency costs generated by selective renegotiation of claims written on the component...

Electricity market design in the United States is increasingly dominated by locational marginal pricing (LMP) of energy and transmission. LMP markets are typically coupled with periodic auctions of financial transmission rights (FTRs) to hedge transmission price risks. While LMP designs offer...

We examine voting by a board designed to mitigate conflicts of interest between privately informed insiders and owners. Our model demonstrates that, as argued by researchers and the business press, boards with a majority of trustworthy but uninformed quot;watchdogquot; agents can implement...