Complexity can create value. At the same time, understanding more complex goods requires more of an agent’s attention. We show that equilibrium complexity is generally ine?cient when agents face competing demands on their limited attention. Because attention allocation is hump-shaped...

We develop a model of financial intermediation with remunerated Central Bank Digital Currency (CBDC) as consumers’ alternative to bank deposits and an endogenous risk of bank runs. Echoing widespread concerns, higher CBDC remuneration raises bank fragility by increasing consumers’ withdrawal...

We study a credit market in which lending decisions depend on a borrower's digital profile, and the borrower can manipulate their digital profile. When the borrower observes the amount of data collected by the lender, manipulation increases as the lender...

Many regulations aim at promoting coordination among creditors in bankruptcy by ex post restricting their ability to exit distressed firms. However, such restrictions may harm creditors’ ex ante incentives to stay invested, thereby worsening coordination outcomes. We build a dynamic...

I study the optimal integration of humans and technologies in multi-layered decision-making processes. Each layer can correct existing errors but may also introduce new ones. A one-dimensional quality metric – a decision-maker’s error correction capability normalized by its new errors...

We study the joint design of two prominent micro-prudential policy tools: bank
regulation that enforces operational standards via rules, and market discipline through
information disclosure. Disclosure can be state-contingent but creates a trade-off between
incentives and the ex-post...