We study a capital reallocation problem in which  investors can enter into a new market where they compete with each other in identifying the best deals. While ex ante investors are uncertain about their relative advantage in identifying the best deals, they...

This paper studies incentives in a dynamic contracting framework of a levered firm. In particular, the manager selects long-term and short-term efforts, while shareholders choose initially optimal leverage and ex-post optimal default policies. There are three results. First, shareholders trade...

We develop a tractable general equilibrium framework of housing and mortgage markets with aggregate and idiosyncratic risks, costly liquidity and strategic defaults, empirically relevant informational asymmetries, and endogenous mortgage design. We show that adverse selection plays an important role in...

We show that the availability of credit ratings (or other public information) increases the allocative efficiency of cash flows by reducing costly retention, but reduces lending standards and can lead to an oversupply of credit. These findings are in contrast...

This paper studies the classic information-sharing problem in a duopoly setting in which firms learn information from a financial market. By disclosing information, a firm incurs a proprietary cost of losing competitive advantage to its rival firm but benefits from...

We study a situation in which a regulator relies on risk models that banks produce in order to regulate them. A bank can generate more than one model and choose which models to reveal to the regulator. The regulator can...