We study a bilateral trade environment in which a seller exerts cognitive efforts to identify the optimal product design for a buyer. Should the seller fail to discover the innovative design, he has the option to induce additional cognition from the buyer by making the product flexible at an...

This paper studies a financial contracting problem where a firm privately observes its cash flow and faces a limited liability constraint. The firm's collateral is piecemeal divisible and can only be liquidated continuously by resorting to the service of a costly third party, typically...