We provide experimental evidence that contractual incompleteness, ie, the absence of third party enforcement of workers’ effort or the quality of the good traded causes a fundamental change in the nature of market interactions. If contracts are complete the vast majority of trades are...

In many intermediate goods markets buyers and sellers both have market power. Contracts are usually long-term and negotiated bilaterally, codifying many elements in addition to price. We model such bilateral oligopolies as a set of simultaneous Rubinstein-Ståhl bargainings between pairs of...

We estimate the costly-arbitrage model of Boyd and Jagannathan (1994) using Norwegian stock market data. Taxable distributions take place at two separate dates, one that entails the distribution of an imputation-tax credit and another the distribution of the cash dividend. We find that the...

This Paper solves explicitly a simple equilibrium asset pricing model with liquidity risk – the risk arising from unpredictable changes in liquidity over time. In our liquidity-adjusted capital asset pricing model, a security’s required return depends on its expected liquidity as well as on...

This Paper shows that over monitoring a partner in the initial phase of a relationship may not be optimal if the goal is to determine loyalty and if the cost of ending the relationship increases over time. This intuition is simple: by monitoring too much we lose the opportunity to learn how the...

Firms that maintain no formal record of actions and events would hardly be considered well managed. Yet, organizations that require the recording of actions and the filing of reports are often labeled ‘bureaucratic’ and inefficient. This Paper argues that the thin line between efficient...

Using firm-level data, we provide evidence that, although monetary policy affects real investment, the effect operates differentially: the greater its export intensity the less a firm is affected by tight money. We examine several interpretations and conclude that the impact is transmitted...

Agents from a homogeneous population organize themselves into productive partnerships and are confronted with a hold-up problem when making relation-specific investments in those partnerships. The problem is mitigated if agents can leave a partnership in which they have invested, bear the costs...

The virtual economy argument for Russia suggests that barter -a payment in goods rather than cash - allows the parties to pretend that the manufacturing sector is producing value added by enabling this sector to sell its output at a higher price than its market value. We confront this prediction...