This paper provides an explanation for why the sunk cost bias persists among firms in a competitive environment in which rich learning possibilities are allowed. We envision firms that experiment with cost methodologies that are consistent with real-world accounting practices, including ones...

We consider the problem of inducing agents who are concerned with their careers to reveal their private information about a project which has originated with one of them. A successful project raises the inventor's chance of promotion, at his peer's expense. Thus, the peer has an incentive to...

We use a simple graphical moral hazard model to compare monitored (non-traded) bank loans versus traded (non-monitored) bonds as sources of external funds for industry. We contrast the conditions that theoretically favour each system, such as the size and number of firms, with conditions...

Several standard components of managerial compensation contracts have been criticized for encouraging managers to manipulate short-term information about the firm, thereby reducing transparency. This includes bonus schemes that encourage earnings smoothing, and option packages that allow...

In this paper we study a situation were the planner cannot commit to a mechanism and the outcome function is substituted by the planner herself. We assume 1) agents have complete information and play simultaneously; and 2) given the messages announced by the agents, the planner reacts in an...

A big power is facing a small power that may have developed weapons of mass destruction. The small power can create strategic ambiguity by refusing arms inspections. We study the impact of strategic ambiguity on arms proliferation and welfare. Strategic ambiguity is a substitute for actually...