This paper resolves three empirical puzzles in outsourcing by formalizing the adaptation cost of long-term performance contracts. Side-trading with a new partner alongside a long-term contract (to exploit an adaptation-requiring investment) is usually less effective than switching to the new...

Strausz (2017) claims that crowdfunding implements the optimal mechanism design outcome in an environment with entrepreneurial moral hazard and private cost information. Unfortunately, his analysis, solution and claim depend critically on imposing an untenable condition (29) that he had...