We view a contract as a list of outcomes. Ex ante, the parties commit not to consider outcomes not on the list, i.e., these are quot;ruled outquot;. Ex post, they freely bargain over outcomes on the list, i.e., the contract specifies no mechanism to structure their choice; in this sense outcomes...

We are concerned with the design of a constitution for a firm--an ex ante contract which assigns residual rights of control (and possibly residual income rights) without reference to the issue to be decided. We focus attention on two polar constitutions: nonprofit cooperatives and outside...

Consider an entrepreneur who needs to raise funds from an investor, but cannot commit not to withdraw his human capital from the project. The possibility of a default or quit puts an upper bound on the total future indebtedness from the entrepreneur to the investor at any date. We characterize...

We develop a new bankruptcy procedure that makes use of multiple auctions. The procedurequot; is designed to work even when capital markets do not function well (for example in developingquot; economies, or in economies in transition) -- although it can be used in all economies.quot

We develop a model of hierarchies based on the allocation of authority. A firm's owners have ultimate authority over a firm's decisions, but they have limited time or capacity to exercise this authority. Hence owners must delegate authority to subordinates. However, these subordinates also have...

When drawing up a contract, it is often impracticable to specify all the possible relevant contingencies, and so contracts are typically incomplete. This paper considers the extent to which these gaps might be filled by building into the contract a mechanism for revising the terms of trade. One...

We are concerned with the design of a constitution for a firm - an ex ante contract which assigns residual rights of control (and possibly residual income rights) without reference to the issue to be decided. We focus attention on two polar constitutions: non-profit cooperatives and outside...

We analyse the role of debt in persuading an entrepreneur to pay out cash flows, rather than to divert them. In the first part of the paper we study the optimal debt contract - specifically, the trade-off between the size of the loan and the repayment - under the assumption that some debt...