Two roles for stipulated damage provisions have been debated in the literature: protecting relationship-specific investments and inefficiently excluding competitors. Aghion and Bolton (1987) formally demonstrate the latter effect in a model without investment or renegotiation. Although...

Previous articles have noted the possibility of socially inefficient levels of entry in markets in which firms must incur fixed set-up costs upon entry. This article identifies the fundamental and intuitive forces that lie behind these entry biases. If an entrant causes incumbent firms to reduce...

We consider the effect of a renegotiable exclusive contract restricting a buyer to purchase from only one seller on the levels of noncontractible investments undertaken in their relationship. Contrary to some informal claims in the literature, we find that exclusivity has no effect when all...

Using an extension of Ghemawat and Nalebuff's (1985) model, I analyze the outcome of industry decline when firms have multiplant operations. The analysis reveals that no natural generalization of their strong empirical prediction, that the larger of two single-plant duopolists exits first, holds...

Traditional analyses of industrial behavior typically link the exercise of market power in an industry to internal features such as demand conditions, concentration, and barriers-to-entry. Nevertheless, some economists have remained concerned that external factors, such as contact across...

In a variety of markets firms voluntarily and independently delegate control over certain aspects of marketing to common agents. In this article we present an explicit model of agency delegation where firms noncooperatively select agents, name output prices, and choose compensation schemes. We...