In a seminal paper, Rothschild and Stiglitz (1976) show that competitive markets with incomplete information in which firms offer contracts to screen privately informed agents may have no equilibrium. In this paper, we argue that frictions in the form of delay or congestion provide a natural...

We analyze bilateral bargaining with one-sided offers where the buyer has private information about his valuation but does not know whether the seller is committed to a known fixed price or whether it pays to hold out until he possibly reduces his offer. We make the `gap' assumption that there...

We consider bargaining between a seller and a buyer with private information about his valuation. We introduce the novel feature that with some probability a new buyer may visit the seller's shop each period, which grants the seller the option to switch to a new trading partner. We analyze the...

In an internal capital market, individual departments may compete for a share of the firm's budget by engaging in wasteful influence activities. We show that firms with more levels of hierarchy may experience lower influence costs than less hierarchical firms, even though the former provide more...

This paper presents a theory of integration based on the inability of parties to write comprehensive financial contracts. In our model, integration entails both benefits and costs. On the one hand, integration involves liquidity spillovers between projects ensuring that integrated firms can...

We consider a game of signaling where the informed sender proposes a contract, which can only be accepted or rejected by the receiver. While most of the literature considers a bilaterally monopolistic setting, we embed the game in a search market environment where a sender may switch to another...

We examine the role of security design when lenders make inefficient accept or reject decisions after screening projects. Lenders may be either "too conservative," in which case they reject positive-NPV projects, or "too aggressive," in which case they accept negative-NPV projects. In the first...

The first part of this paper analyzes the impact of horizontal mergers of suppliers or retailers on their respective bargaining power. In contrast to previous approaches, we suppose that parties resolve the bargaining problem efficiently. Moreover, by ensuring that demand is independent at all...

This paper provides a conceptual framework of multilateral bargaining in a bilaterally oligopolistic industry to analyze the motivations for horizontal mergers, technology choice, and their welfare implications. We first analyze the implication of market structure for the distribution of...

This paper presents a model of takeover incentives in an oligopolistic industry, which,in contrast to previous approaches, takes both insiders' and outsiders' gains from anincrease in industry concentration into account. Our main application is to comparetakeover incentives in a differentiated...