Financial Contracts, Bargaining and Security Design∗
نویسنده
چکیده
We explore how a firm optimally finances multiple projects when profits depend on subsequent negotiations with buyers, a common situation in procurement projects and vertical industries. A tension arises because the agreements reached with buyers depend on how the proceeds from the sales will be divided with investors. A financial contract determines the division. Should the proceeds from multiple projects be combined and divided jointly or separated and divided independently? Which securities implement the optimal division? In some common conditions the optimal contract takes a simple form. The firm finances each project separately with debt. ∗I thank Alessandro Lizzeri for the helpful discussions and suggestions. Comments given by Tomasz Sadzik, Guillaume Frechette, Karl Schlag, Douglas Gale, Michael Richter, Ariel Rubinstein, Motty Perry, Daniel Martin, Eddie Dekel, Emanuel Vespa, Alistair Wilson, Leonardo Pejsachowicz, Daniel Garcia and Tom Cunningham are gratefully acknowledged. †University of Vienna, Department of Economics, Oscar Morgenstern Platz 1, Vienna, Austria.
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