We study relative performance of stochastic and deterministic mechanisms in a principal-agent model with hidden information and no monetary transfers. We present an example in which stochastic mechanisms perform strictly better than deterministic ones and can implement any outcome arbitrarily close to the first-best. Nevertheless, under the common assumption of quadratic payoffs and a certain r...

This paper proposes a new approach to explain the long-term evolution of a supplier industry. The network of vertical relations between suppliers and buyers is identified as a determinant of the concentration of the supplier industry and of the dynamics of market shares. The vertical structure of the industry is captured by collecting information on all vertical relations between dyads of firms...

This paper presents a theoretical model that combines employers learning about worker productivity, human capital acquisition, job-assignment and resolution of worker uncertainty regarding disutility of work from a job, to show how widely documented findings on both wage and promotion dynamics and turnover can be captured in a single set-up. Specifically we show how our model can capture result...

We provide an alternative theory of divestiture that relies on product-line complementarities and product market competition. We show that in equilibrium competing conglomerates with complementary product lines have incentives to divest and that such divestitures increase both the prices of all the products and the profits of the parent firms, but reduce total surplus. We further show that if t...

Focus — specialization and speciÞc technology — improves productivity but leads to more dependency and opens a door for power problems. We analyze how organizational design and the choice of technology interact with the allocation of ownership in minimizing the holdup problem in the property rights theory of Grossman-Hart-Moore. We Þnd a novel motive for job rotation: rotation reduces holdup pr...

This paper examines the employment effects of acquisitions for acquired European firms taking non-random selection of acquisition targets explicitly into account. Following the empirical firm growth literature and theories put forward in the mergers and acquisition (M&A) literature we control for convergence dynamics in firm size and distinguish between different types of acquisitions. Empirica...

Contingent ownership structures are prevalent in joint ventures. This paper o ers an explanation based on the investment incentives provided by such an arrangement. We consider a hold-up problem in which two parties make relationshipspeci c investments sequentially in order to generate a joint surplus in the future. In our model, the following ownership structure implements rst best investments...