The authors consider a wide number of applications of an intrafirm bargaining game within organizations where employees and the firm engage in wage negotiations. Under their presumption that contracts cannot bind employees to the organization, the resulting stable wage and profit profiles give...

This paper demonstrates that, in a simple setting with managerial concern for reputation and asymmetric information on ability, most managers may refrain from undertaking innovations that stochastically dominate an industry standard. Common components of uncertainty lead to market inferences of...

We analyze the design and renegotiation of covenants in debt contracts as a specific example of the contractual assignment of property rights under asymmetric information. Specifically, we consider a setting where managers are better informed than lenders regarding potential transfers from debt...

This paper develops a model in which managers voluntarily choose debt to credibly constrain their own future empire-building. Dynamically consistent capital structure is derived as the optimal response in each period of partially entrenched managers trading off empire-building ambitions with the...

This excellent book provides the reader with a broad introduction to, and a powerful advocacy of, behavioral finance. In the tradition of the best of the Clarendon Lecture Series, Andrei Shleifer provides a clear context and motivation for a collection of his influential ideas in this field,...

We estimate the consumption of alcohol during Prohibition using mortality, mental health and crime statistics. We find that alcohol consumption fell sharply at the beginning of Prohibition, to approximately 30 percent of its pre-Prohibition level. During the next several years, however, alcohol...

This paper discusses the costs and benefits of drug prohibition. It offers a detailed outline of the economic consequences of drug prohibition and a systematic analysis of the relevant empirical evidence. The bottom line is that a relatively free market in drugs is likely to be vastly superior...

Despite familiar arguments for diversification, many investors choose to hold significant blocks of equity in the same firm. While control benefits may explain majority blocks, most blocks are much smaller. This paper develops a theory whereby such blocks can confer to their holders partial...