We discuss the literature on vertical relationships between firms from a contract-theoretic perspective.

This paper illustrates in a simple model how the presence of asymmetric information can make it impossible to achieve ex post efficient trade decisions in negotiations.

This paper provides a non-technical discussion of the incomplete contracting approach to the theory of the firm developed by Grossman and Hart (1986). This approach offers an answer to the questions regarding the boundaries of the firm first raised by Coase (1937).

This article considers a bilateral externality problem, in which injurers and victims choose activity levels and levels of care. The incentive effects of liability rules and fines for harm done are analyzed. It is shown that in general socially optimal behaviour can only be induced if fines are...