This paper analyzes the efficiency of three simple cost-based pricing heuristics in a two-period capacity planning model with uncertain demand. All policies start with full cost introductory prices but differ in second-period pricing. Under "adaptive full-cost pricing", the firm updates...

We demonstrate a novel link between relationship-specific investments and risk in a setting where division managers operate under moral hazard and collaborate on joint projects. Specific investments increase efficiency at the margin. This expands the scale of operations and thereby adds to the...

We examine how uncertain veracity of external news influences investor beliefs, market prices and corporate disclosures. Despite assuming independence between the news' veracity and the firm’s endowment with private information, we find that favorable news is taken “with a grain of salt”...

Integrated ownership is often seen as a way to foster specific investments. However, even in integrated firms, managers invest to maximize their compensation, which is chiefly driven by divisional income. Thus it is not clear that integration has any effect on investments in a world of...

I study the consequences of a random exposure to common risk for the purpose of relative performance evaluation (RPE) and find that it significantly affects the usefulness and the empirical measurement of RPE. According to my analysis, the magnitude of the exposure risk not only determines how...