Recently, some literature on incomplete contracts studies the cases where renegotiations take place inefficiently. We extend the incomplete contract model in Hart (2009) by assuming that one party chooses an action which affects renegotiation costs. In our model, renegotiation costs are...

We study optimal auctions with expectation-based loss-averse bidders. We first consider when bidders are ex-ante identical. Although symmetric designs are optimal for bidders with expected-utility preferences, if the degree of loss aversion is sufficiently large relative to the variation in...

We consider relational contracts for teams in which the agents monitor each other. We demonstrate that providing rents to the agents strengthens peer sanction endowed within the agents' ongoing relationship, which may have a negative effect to induce unproductive collusion as well as a positive...