This paper investigates under which circumstances negotiating simultaneously over multiple issues or assets helps reduce inefficiencies due to the presence of asymmetric information. We find that a simultaneous negotiation over multiple assets that are substitutes reduces inefficiencies. The effect is stronger if goods are heterogeneous, and in this case the inefficiency can be eliminated altog...

We examine the effects of different forms of feedback information on the performance of markets that suffer from moral hazard problems due to sequential exchange. As orthodox theory would predict, we find that providing buyers with information about sellers’ trading history boosts market performance. More sursprisingly, this beneficial effect of incentives for reputation building is considerabl...

The paper examines the theoretical foundations of the hold–up problem. At a first stage, one agent decides on the level of a relationship– specific investment. There is no contract, so at a second stage the agent must bargain with a trading partner over the surplus that the investment has generated. We show that the conventional underinvestment result hinges crucially both on the assumed bargai...

This paper analyzes the e ect of a possible takeover on information ows and on the terms of trade in business relationships. We consider a longterm relationship between a rm and a privately informed stakeholder, say a buyer. In our model, takeovers both increase the surplus from trade and enable the rm to extract a potentially higher share of the surplus from the buyer. The possibility of a tak...

I examine the theoretical foundations underlying the incomplete contracts literature. A common justi,cation for the assumption that contracts are not fully contingent on the state of nature is to point out that some aspects of the state may be unforeseen or indescribable to the contracting partners at the time the contract is written. I argue, however, that as long as risk-averse parties can fo...

This paper investigates politically connected firms in Germany. With the introduction of a new transparency law in 2007, information on additional income sources for all members of the German parliament became publicly available. We find that members of the conservative party (CDU/CSU) and the liberal party (FDP) are more likely to work for firms than members of left-wing parties (SPD and The L...

Heterogeneous firm models of international trade include a country specific sunk cost that firms pay to enter a foreign market. Despite the important role these costs play in determining firm participation, we understand little about their structure. In particular, we do not know if there are country complementarities or general exporting experience components in entry costs. Characterizing the...

The magnitude of mutual funds’ business ties with their portfolio firms is documented and is linked to funds’ proxy votes at specific firms and to overall voting practices. Aggregate votes at the fund family level indicate a positive relation between business ties and the propensity to vote with management. Votes at specific firms, however, reveal that funds are no more likely to vote with mana...

Delayed perfect monitoring in an in…nitely repeated discounted game is modelled by letting the players form a connected and undirected network. Players observe their immediate neighbors’behavior only, but communicate over time the repeated game’s history truthfully throughout the network. The Folk Theorem extends to this setup, although for a range of discount factors strictly below 1, the set ...

We first investigate whether or not ex post destruction can possibly alleviate the hold-up problem in a one-shot game between a supplier and a buyer. The answer is yes but only when the buyer believes that the supplier might be a Homo reciprocans agent with sufficiently strong propensity for reciprocity. Under incomplete information with informed supplier, investment is made feasible by the “mi...