In this paper, we present a dynamic general equilibrium model to investigate how different contracting modes based on formal and relational enforcements endogenously emerge and are dynamically linked with the process of economic development. Formal contracts are enforced by third-party...

In this paper we present a dynamic general equilibrium model to investigate how different contracting modes based on formal and relational enforcements endogenously emerge and are dynamically linked with the process of economic development. Formal contracts are enforced by third party...

We study internal organization of a firm that comprises a CEO and two division managers. The two key ingredients of our model are externalities among divisions' projects that may require coordination and effort incentives for the CEO and the two division managers. Depending on how decision...

This paper investigates what legal rules for breach of contracts can support the efficiency in a principal-agent relationship when complete contracts cannot be written ex ante and the agent chooses unobservable effort in advance of trade. We examine both specific performance and expectation...

This paper studies internal organization of a firm using an incomplete contracting approach a la Grossman-Hart-Moore and Aghion-Tirole. The two key ingredients of our model are externalities among tasks that require coordination, and investment in task-specific human capital. We compare three...

In order to get good positions in companies, people try to enter highly-ranked universities. However, abilities vary greatly between individuals. High-ability individuals have an incentive to send signals to firms by obtaining a higher level of education in order to distinguish themselves from...

We investigate the effects of contract renegotiation in multi-agent situations where risk-averse agents negotiate a contract offer to the principal after the agents observe a common, unverifiable perfect signal about their actions. We show that renegotiation with multiple agents reduces the cost...