Politicians should spend money as efficiently as possible. But what is the best method of granting state aid to firms? We use a theoretical model with firms that differ in their success probabilities and compare different types of direct subsidies with indirect subsidies through bank loans. We...

Should the European Union grant state aid through an institution like the European Investment bank? This paper evaluates the efficiency of different measures for granting state aid. We use a theoretical model with firms that differ in their creditworthiness and compare different types of...

Should the European Union grant state aid through an institution like the European Investment bank? This paper evaluates the efficiency of different measures for granting state aid. We use a theoretical model with firms that differ in their creditworthiness and compare different types of...

Consider a two-product firm that decides on the quality of each product. Product quality is unknown to consumers. If the firm sells both products under the same brand name, consumers adjust their beliefs about quality subject to the performance of both products. We show that if the probability...

Is the reputation of a firm tradable when the change in ownership is observable? We consider a competitive market in which a share of owners must retire in each period. New owners bid for the firms that are for sale. Customers learn the owner's type, which reflects the quality of the good or...

This paper investigates the factors influencing banks' decision to engage in advanced risk management, from both a theoretical and an empirical perspective. In recent decades, credit risk management in banks has become highly sophisticated and banks have become more active and advanced in the...

We show that team formation can serve as an implicit commitment device to overcome problems of self-control. In a situation where individuals have present-biased preferences, any effort that is costly today but rewarded at some later point in time is too low from the perspective of an...

The severity and depth of the recent financial crisis hit many by surprise. Despite warning signs, the financial system seems to have been unable to aggregate existing information. As the events of Fall 2008 showed, many investors were caught off guard by the large number of banks collapsing...

The longer an agent is employed in a job, the more the principal will have learned about his ability through the history of performance. With implicit incentives, influence perceptions and effort incentives decrease over time. Rotating agents to a different job deletes learning effects about...