Papers
Uploaded: Mar 14, 2019
The Tragedy of Complexity
This paper presents an equilibrium theory of product complexity. Complex products generate higher potential value, but require more attention from the consumer. Because consumer attention is a limited common resource, an attention externality arises: Sellers distort the complexity of their...
Uploaded: Mar 13, 2019
Asymmetric Information and Security Design under Knightian Uncertainty
We study a signaling game in which an issuer with private information about the distribution of the project’s cash flows designs a security to sell to an uninformed investor to raise financing for the project. The investor faces Knightian uncertainty...
Uploaded: Mar 13, 2019
Bank Capital Forbearance
We analyze the strategic interaction between undercapitalized banks and a supervisor who may intervene by preventive recapitalization. Supervisory forbearance emerges because of a commitment problem, reinforced by fiscal costs and constrained capacity. Private incentives to comply are lower when supervisors...
Uploaded: Mar 12, 2019
Liquidity Sentiments
We develop a rational theory of liquidity sentiments in which the market outcome in any given period depends on agents' expectations about market conditions in future periods. Our theory is based on the interaction between adverse selection and resale considerations...
Uploaded: Mar 11, 2019
Dynamic contracting under soft information.
A principal delegates the running of a project to an agent subject to moral hazard over an infinite horizon, and cannot observe any of the outcomes. The agent sends reports at each instant t; naturally reports may be manipulated. Eliciting...
Uploaded: Mar 11, 2019
Capital Misallocation and Risk Sharing
This paper shows that factor misallocation is closely tied to the risk-sharing avenues available to firm owners. In contrast to the commonly studied bond-only economy with collateral constraints (for example Moll (2014)), we find that the degree of misallocation is...
