Licensing in a patent thicket allows firms to either avoid or resolve hold-up. Firms’ R&D incentives depend on whether they license ex ante or ex post. We develop a model of a patent portfolio race, which allows for endogenous R&D efforts, to study firms’ choice between ex ante and ex post licensing. The model shows that firms’ relationships in product markets and technology space jointly deter...

This study presents an intriguing contrast of the ex ante and ex post relations between mortgage securitization and loan performance using a comprehensive dataset from a major national mortgage bank. While the paper supports that the bank applies lower screening efforts on loans that have higher ex ante probability of being securitized, it further shows that loans remaining on the bank’s balanc...

Using three measures of covenant restrictiveness, I examine the association between the ex ante design of debt covenant restrictiveness and the ex post exercise of creditor control rights. I find that contracts with higher level of covenant restrictiveness at loan origination are more likely to subsequently experience both covenant violations and renegotiations, suggesting that stricter covenan...

This paper develops algorithms for dynamically consistent updating of ambiguous beliefs in the maxmin expected utility model of decision making under ambiguity. Dynamic consistency is the requirement that ex-ante contingent choices are respected by updated preferences. Such updating, in this context, implies dependence on the feasible set of payoff vectors available in the problem and/or on an ...

We study the interaction between (a) inefficiencies in the post-default debtor-creditor bargaining game and (b) ex ante debtor moral hazard and excessive lending in sovereign debt markets. Conditional on default, selffulfilling debt crisis driven by creditor coordination failure exists and crisis risk is inefficiently high. Strengthening collective action clauses (CACs) has an ambiguous impact ...

Can the Pareto criterion guide policymakers who do not know the true model of the economy? If policymakers specify ex ante preferences for agents, then Pareto improvements from a distorted status quo are usually possible, and with more commodities than states, one can implement almost every Pareto optimum. Unlike the standard second welfare theorem, planners cannot dictate allocations: agents m...

We study random assignment economies with expectedutility agents, each of them eventually obtaining a single object. Inspired on Hylland and Zeckhauser’s (1979) Pseudomarket mechanism (PM) and on a serial dictatorship, we introduce the Sequential Pseudomarket (SP) where groups of agents are called turn by turn and participate in a pseudomarket for the remaining objects. To measure e¢ ciency, we...

In most states, trial judges’ sentencing is constrained by both ex ante constraints, in the form of mandatory and guideline sentences, and ex post review, often by the electorate. Might voters alter their evaluation of judges given the existence of boundaries on judicial discretion? Further, can legislators exploit this response? We present a model of ex ante and ex post control of judges given...

We consider a principal-agent model of adverse selection where, in order to trade with the principal, the agent must undertake a relationship-speci...c investment which a¤ects his outside option to trade, i.e. the payo¤ that he can obtain by trading with an alternative principal. This creates a distinction between the agent’s ex ante (before investment) and ex post (after investment) outside op...

We analyze patent licensing by a patent holder to downstream technology users. We study how the structure and level of royalties depends on the patent’s strength, i.e., the probability it would be upheld in court. We examine the social value of determining patent validity before licensing, in terms of deadweight loss (ex post) and innovation incentives (ex ante). When downstream users do not co...