This paper argues that the strategic use of debt favours the revelation of information in dynamic adverse selection problems. Our argument is based on the idea that debt is a credible commitment to end long term relationships. Consequently, debt encourages a privately informed party to disclose...

We study the optimal regulation of a monopolist when intrinsic efficiency (intrinsic cost) and empire building tendency (marginal utility of output) are private information, but actual cost (the difference between intrinsic cost and effort level) is observable. This is a problem of...