We study the joint determination of product quality and complexity in a rational setting. We introduce a novel notion of complexity, which affects how difficult it is for an agent to acquire information about product quality. In our model, an...

I develop a search-and-bargaining model of endogenous intermediation in over-the-counter markets. Unlike the existing work, my model allows for rich investor heterogeneity in three simultaneous dimensions: preferences, inventories, and meeting rates. By comparing trading-volume patterns that arise in my model...

We present a model of liquidity management and financing decisions under moral hazard in which a firm accumulates cash to forestall liquidity default. When the cash balance is high, a tension arises between accumulating more cash to reduce the probability...

This paper explores the incentives of product designers to complexify products, and the resulting implications for overall product quality. In our model, a consumer can accept or reject a product proposed by a designer, who can affect the quality and...

Entrepreneurs obtain funding liquidity by issuing securities backed by the current period dividend and resale price of a long-lived collateral asset. They are privately informed about the collateral quality. Higher (lower) resale price lowers (increases) adverse selection and makes the...

The rational expectations paradigm restricts the subjective beliefs of investors to align with the objective distribution. We relax this constraint and analyze how investors optimally choose their subjective beliefs about the information contained in their private signals and in prices....