We model the interaction between product market competition and internal governance at firms. Competition makes it more difficult to infer a manager's action given the realized output, thus increasing the cost of inducing effort. An exogenous change in the incentive to shirk increases managerial...

We model competition between risk-neutral principals who hire weakly risk-averse agents to produce a good of variable quality. The agent can increase the likelihood of producing a high-quality good by providing costly effort. We demonstrate that, when the agent is strictly risk-averse, the cost...

We consider a two-stage model in which two firms first invest in R&D to reduce their marginal production costs, and then either compete or collude in the output market. When they collude, they bargain over a cartel agreement to divide the collusive profit. If bargaining breaks down, they revert...

We develop a model of vertical differentiation in the Internet search engine market. A key property of the model is that users who try out one engine may be dissatisfied with the results, and consult another engine in the same session. This residual demand allows lower quality engines to survive...