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Consider a long-term relationship between a seller and a buyer whose valuation (for a per-period service or a durable good) is private. As trade progresses, the valuation will be partially revealed, and it may be impossible for the parties to commit ex-ante not to take advantage of this. We analyse this situation first by supposing that the parties can sign a sequence of short-term contracts; and secondly by supposing that they can sign a long-term contract, but cannot commit not to renegotiate it later. We find a close relationship in the second case between the optimal long-term contract and the non-commitment outcome in the standard Coasian durable good model. Our results also have implications for hidden-information principal-agent models.

This paper analyzes the optimality of the one share-one vote rule. We focus on takeover bids as a mechanism for allocating control. We assume two types of control benefits — benefits to security holders and private benefits to the controlling party. One share-one vote maximizes the importance of benefits to securityholders relative to benefits to the controlling party and hence encourages the selection of an efficient management team. However, one share-one vote does not always maximize the reward to securityholders in a corporate control contest. Sufficient conditions are given for one share-one vote to be optimal overall. The paper also includes a discussion of the empirical evidence.