This paper employs mechanism design to study how imperfect legal enforcement impacts simultaneously on the availability (or scale) of credit for investment and interest rates. The analysis combines two standard ingredients of the development and contract literatures: limited commitment, which...

We create a dynamic theory of endogenous risk sharing groups, with good internal information, and their coexistence with relative performance, individualistic regimes, which are informationally more opaque. Inequality and organizational form are determined simultaneously. Numerical techniques...

This paper establishes a relationship between the observability of common shocks and optimal organizational design under a multiagent moral hazard environment. We show that, with sucient information about common shocks, a cooperative organization can be optimal even if outputs are highly...