We explain why European trucking carriers are much smaller and rely more heavily on owner-operators (as opposed to employee drivers) than their US counterparts. Our analysis begins by ruling out differences in technology as the source of those disparities and confirms that standard hypotheses in organizational economics, which have been shown to explain the choice of organizational form in US i...

This paper revisits the hypothesis that nonprofit organizations emerge in markets that are characterized by contractual incompleteness because they ensure consumers against opportunistic behavior. We extend the Glaeser and Shleifer (2001) framework which studies an entrepreneur’s optimal choice of organizational form and service quality when quality is noncontractible into a repeated interactio...

Two bargaining parties play the Nash Demand Game to share a pie whose size is determined by one party's investment decision. Various investment levels are subgame-perfect. Adding the investment decision to Young's evolutionary bargaining model yields the following long-run outcome: efficient investment prevails and the investor's share of the pie approximates die maximum of (i) the smallest sha...

I analyze how a buyer optimally contracts with a seller who is privately informed about his information structure, i.e., his ability of acquiring private signals containing imperfect cost information. I demonstrate that the seller ranks information structures according to the order of their signal distributions in the sense of second order stochastic dominance. Optimal contracts offer sellers w...

We show that although the prominent centrality measures in network analysis make use of different information about nodes’ positions, they all process that information in a very restrictive and identical way. They all spring from a common family that are characterized by the same axioms. In particular, they are all based on a additively separable and linear treatment of a statistic that capture...

We analyze in an incomplete contracts model whether a supplier should be integrated if in addition to his investment level he chooses the degree of relationship specificity. A basic trade-off arises: While non-integration leads to higher investment incentives, potential synergies are foregone. Hence, integration can be optimal even though only the supplier makes an investment decision. This may...

We explore the dynamic evolution of property rights regimes in R&D alliances using the incomplete contract approach pioneered by Grossman, Hart, and Moore. In contrast to the standard analysis, the productive asset is an excludable public good such as a patent. Moreover, both firms can decide whether to disclose their know-how and invest effort. Know-how that has once been released cannot be co...

The practice of resetting strike prices on underwater executive stock options has drawn criticism for weakening managerial incentives. Our model shows that although the anticipation of resetting can negatively a!ect initial incentives, resetting can still be an important, value-enhancing aspect of compensation contracts, even from an ex-ante standpoint. In fact, we "nd that some resetting is al...