1. What is an “identification problem”? Illustrate conditions under which there might be an identification problem involving: employee–employer compensation contracting; sale of an asset; a merger....

1. What is an “identification problem”? Illustrate conditions under which there might be an identification problem involving: employee–employer compensation contracting; sale of an asset; a merger. Why is it important for outsiders to recognize when an identification problem may be present?

2. How do hidden-information problems affect the costs of corporate restructuring? Might the tax benefits of such restructurings be sacrificed by corporations because of these problems?

3. In the presence of hidden-action problems, under what conditions will a deferred compensation contract both minimize taxes and provide desirable work incentives for employees?

4. What is the under-completion problem? Provide an example in an R&D drug research setting. How might the costs of this problem be reduced?