I study the implications of exclusive contracts for smartphones. Theory models indicate that lower demand elasticities for handsets relative to wireless networks could lead to exclusive contracts maximizing joint profits of the contracting parties. I estimate smartphone and carrier demand on a detailed monthly market-level dataset of US consumer decisions over 2008-2010. Counterfactual simulati...

We develop a model of interlocking bilateral relationships between upstream firms (manufacturers) that produce differentiated goods and downstream firms (retailers) that compete imperfectly for consumers. Contract offers and acceptance decisions are private information to the contracting parties. We show that both exclusive dealing and vertical integration between a manufacturer and a retailer ...

We consider the combined impact of agency problems and behavioural factors on venture capital/entrepreneur contracting and performance. Particularly, we develop a behavioural game-theoretic model in which a venture capitalist and an entrepreneur negotiate over their respective equity shares, and then exert value-adding efforts in running the business. Double-sided moral hazard exists in that bo...

CONNECTING NATIONAL SAFETY NETS: THE DIALECTICS OF THE BASEL II CONTRACTING PROCESS Edward J. Kane Boston College Dialectics is the art or practice of trying to reconcile contradictory ideas. Contracting is a sequential process that employs the dialectics of multiparty give and take to fashion a deal that -to a mutually acceptable degree -can accommodate the contradictory interests of the dealm...

We augment existing studies of spot procurement contracts by introducing relational contracting. We first show that at intermediate interest rates, the form of procurement contract affects the parties’ reneging temptation on a given relational contract, and hence affects the best relational contract that is sustainable. We also show that relational contracts make contracts less complete and com...

We address the issue of intellectual property (IP) rights in onshore and offshore software development outsourcing. IP assets are generally intangible in nature and are easily misappropriated by the contracting parties. The paper examines two IP protection mechanisms employed by firms: rights-sharing arrangements and restrictive covenants and using data from 153 software contracts across 14 cou...

Economic performance depends crucially on how parties adapt to changing circumstances. We therefore study how the organization of economic activity can facilitate such adaptation. Where spot transactions would produce inefficient adaptation, we ask how governance structures (allocations of control) can facilitate relational contracts that improve on spot adaptation. We show that the optimal gov...

We consider explicit formulas for equilibrium prices in a continuous time vertical contracting model. A manufacturer sells goods to a retailer, and the objective of both parties is to maximize expected profits. Demand is an Itô-Lévy process, and to increase realism information is delayed. We provide complete existence and uniqueness proofs for a series of special cases, including geometric Brow...

We analyze a dynamic optimal financial contracting problem in continuous time with risky cash flows between a risk-averse entrepreneur and risk-neutral investors. Two fundamental constraints on the contracting parties are that: 1) the entrepreneur cannot alienate his human capital, and 2) investors have limited liability protection. Given that human capital is risky, the entrepreneur’s inabilit...

Long-term contracts between exporters and importers of LNG increase the debt capacity of large, long-lived, capital investments by reducing cash flow variability. However, long-term contracts also may limit the ability of the contracting parties to take advantage of profitable ephemeral trading opportunities. After developing a model that illustrates these trade-offs, we argue that increased LN...