A well-known view in the literature is that if management is more concerned with the firm's survival than with profitability, it is efficient to use a levered capital structure and thereby transfer the liquidation decision to lenders. Our paper extends this idea to a setting where lenders behave...

Consider a multi-product firm facing an uncertain demand. It will be shown that the firm may benefit from decentralizing the decisions of how much to produce. To obtain these benefits, the firm should use the suggested internal tax incentive scheme. The quantities determined under the suggested...