Today, many biotechnology firms are using strategic alliances to contract with other companies. In this article, Professor Smith contends that the governance structure of these alliances—specifically, the “contractual board”—provides an integrated restraint on opportunism. While an alliance agreement’s exit structure could provide a check on opportunism by allowing the parties to exit at will, ...

In service industries with congestion effects, two very different contractual structures are commonly observed, depending on whether or not firms choose to offer a guaranteed service level. We analyze the impact of these choices onmarket outcomes in oligopolistic industries. Our results highlight howdifferent contractual agreements change the intensity of price competition in service industries...

Background In times of financial hardship, making innovative treatments affordable for society, accessible for patients and profitable for pharmaceutical companies is a challenge. Reimbursement is often threatened by uncertainties about the financial impact or evidence for a treatment. A contractual agreement between the payer and pharmaceutical company can link reimbursement to financial thres...

Thinking about contingencies, designing covenants and seeing through their implications is costly. Parties to a contract accordingly use heuristics and leave it incomplete. The paper develops a model of bounded rationality and examines its consequences for contractual design. It is argued that cognition is a natural source of adverse selection in contractual relationships, that contracts may be...

This paper examines whether historical wealth distributions can affect long run output and distribution despite rational saving behavior and the absence of any technological nonconvexities or externalities. We consider a model of equilibrium short period financial contracts, where poor agents face credit constraints owing to moral hazard and limited liability, and principals and agents are rand...

Advancing upon taxonomical research on interfirm alliances, we investigate the design of entrepreneurial firms’ alliances in more fine-grained terms by focusing on the specific contractual provisions that firms negotiate into their alliance contracts. Drawing upon transaction cost arguments, we examine the determinants of the contractual complexity of collaborative agreements in the German tele...