The paper explains why an issuer may wish to raise external capital by selling multiple financial claims that partition its total asset cash flows, rather than a single claim. It is shown that in an asymmetric information environment, the issuer's expected revenue is enhanced by such cash flow...

The authors examine collateral in a competitive equilibrium in which borrowers can choose hidden actions and may additionally possess hidden knowledge. Apart from explaining the widespread use of collateral despite deadweight costs, they show that an increase in the riskless interest rate causes...

The authors analyze repeated moral hazard with discounting in a competitive credit market with risk neutrality. Even without learning or risk aversion, long-term bank-borrower relationships are welfare enhancing. The main result is that the borrower obtains an infinite sequence of unsecured...

The authors consider the moral hazard in managers undersupplying imperfectly-marketable, firm-specific human capital. Firms may cope by granting long-term wage contracts that protect managers against employment termination. Although ex ante efficient, these contracts may be ex post inefficient...