We investigate regulation as the outcome of a bargaining process between a regulator and a regulated firm. The regulator is required to monitor the firm’s costs and reveal its information to a political principal (Congress). In this setting, we explore the scope for collusion between the...

Victorious alliances often fight about the spoils of war. This paper presents an experiment on the determinants of whether alliances break up and fight internally after having defeated a joint enemy. First, if peaceful sharing yields an asymmetric rent distribution, this increases the likelihood...

We examine the impact of managerial optimism on the inclusion of performance-pricing provisions in syndicated loan contracts (PSD). Optimistic managers may view PSD as a relatively cheap form of financing given their upwardly biased expectations about the firm’s future cash flow. Indeed,...

An innovative firm with private information about its indivisible process innovation chooses strategically whether to apply for a patent with probabilistic validity or rely on secrecy. By doing so, the firm manages its rivals’ beliefs about the size of the innovation, and affects the...

In many cultures and industries gifts are given in order to influence the recipient, often at the expense of a third party. Examples include business gifts of firms and lobbyists. In a series of experiments, we show that, even without incentive or in-formational effects, small gifts strongly...

We study ex post information rents in sequential screening models where the agent receives private ex ante and ex post information. The principal has to pay ex post information rents for preventing the agent to coordinate lies about his ex ante and ex post information. When the agent’s ex...

In this paper we propose a three–level computational equilibrium model that allows to analyze the impact of the regulatory environment on transmission line expansion (by the regulator) and investment in generation capacity (by private firms) in liberalized electricity markets. The basic...

We study contracting between a consumer and an expert. The expert can invest in diagnosis to obtain a noisy signal about whether a low–cost service is sufficient or whether a high–cost treatment is required to solve the consumer’s problem. This involves moral hazard because...

This paper develops an infinite-horizon model of financial institutions that borrow short-term and invest in long-term assets that can be traded in frictionless markets. Because these financial intermediaries perform maturity transformation, they are subject to potential runs. We derive distinct...

We investigate the incentive for partial vertical integration, namely, partial ownership agreements between manufacturers and retailers, when the retailers are privately informed about their production costs and engage in differentiated good price competition. Partial vertical integration...