When parties present divergent econometric evidence, the court may view such evidence as contradictory and thus ignore it completely, without conducting closer analysis. We develop a simple method for distinguishing between actual and merely apparent contradiction based on the statistical...

Our starting point is the following simple but potentially underappreciated observation: When assessing willingness to pay (WTP) for hedonic features of a product, the results of such measurement are influenced by the context in which the consumer makes her real or hypothetical choice or in...

We examine the role of optimal security design when lenders make inefficient accept or reject decisions after screening projects. Lenders may be either quot;too conservativequot;, in which case they reject positive-NPV projects. Or they may be quot;too aggressivequot;, in which case they accept...

We study optimal financial contracting for centralized and decentralized firms. Under centralized contracting headquarters raises funds on behalf of multiple projects and subsequently allocates the funds on the firm's internal capital market. Under decentralized contracting each project raises...

This paper considers the potential cost of subjective judgment and discretion in credit decisions. We show that subjectivity and discretion in the evaluation of borrowers create an incentive problem on the part of the lender. The lender s incentives to accept or reject a borrower depend only on...

We examine the relation between optimal venture capital contracts and the supply and demand for venture capital. Both the composition and type of financial claims held by the venture capitalist and entrepreneur depend on the market structure. Moreover, dierent market structures involve dierent...

We consider the security design problem of a lender who can assess the borrower s project prior to making an accept or reject decision. The lender s subjective assessment is represented by a private signal. Unless the lender extracts the full surplus from the project, her cutoff signal above...