We analyze in an incomplete contracts model whether a supplier should be integrated if in addition to his investment level he chooses the intensity of specialization towards the buyer's needs. A basic trade-off arises: While non-integration leads to higher investment incentives, potential...

The paper offers a selective survey on the incomplete contracts approach to privatization. Furthermore, a simple model of privatization to an owner-manager is developed in which different allocations of ownership rights lead to different allocations of inside information about the firm which in...

This paper deals with a special hold-up problem in privatization.

Target-cost pricing has been a widely applied formula in defence contracting. If this type of pricing arrangement is chosen, the seller's ex-post profit consists of a fixed payment plus some share of the cost overrun, that is the difference between an ex--ante agreed estimation of the production...

The Paper reports a basic Experiment on the option pricing approach. Each trader with an increasing utility for money values the option with his arbitrage free price, which is independent of the probability of the stock movement. The experimental data show that the traiders learn to exploit more...

We review the continuous--time literature on the so-- called direct approach to bond option pricing. Going back to Ball and Torous (1983), this approach models bond price processes directly (i.e. without reference to interest rates or state variable processes) and applies methods that Black and...

Starting with observable annually compounded forward rates we derive a term structure model of interest rates. The model relies upon the assumption that a specific set of annually compounded forward rates is log-normally distributed. We derive solutions for interest rate caps and floors as well...