We consider multi-agent multi-firm contracting when agents benchmark their wages to a weighted average of their peers, where weights may vary within and across firms. Despite common shocks, compensation benchmarking can undo performance benchmarking, so that wages load positively rather than...

We present a simple yet fully rational general equilibrium model that highlights the fact that relative wealth concerns can play a role in explaining the presence and dynamics of financial quot;bubbles.quot; Because our model has a finite horizon, our explanation for the existence of bubbles is...

We present a simple yet fully rational general equilibrium model that highlights the fact that relative wealth concerns can play a role in explaining the presence and dynamics of financial quot;bubblesquot;. Because our model has a finite horizon, our explanation for the existence of bubbles is...

We consider a multi-agent contracting setting when agents have “keeping up with the Joneses” (KUJ) preferences. Because productivity is affected by common shocks, it is optimal to base pay on performance relative to a benchmark. But when agents and care about how their pay compares to...

We develop a stylized general equilibrium model in which technology quot;bubblesquot; occur. In our model, agents are able to invest both in a riskless technology and in a risky one. A high risk/reward technology supports over-investment and risk-taking behavior at a rate which is increasing in...

In this paper, we propose an explanation for biases in portfolio choice. We show that if individuals compete for local resources within their community, their utility depends on their own wealth as well as aggregate community wealth. This leads to an externality in portfolio choice. If investors...

We consider multi-agent multi-firm contracting when agents benchmark their wages to a weighted average of their peers, where weights may vary within and across firms. Despite common shocks, compensation benchmarking can undo performance benchmarking, so that wages load positively rather than...

We consider multi-agent multi-firm contracting when agents benchmark their wages to a weighted average of their peers, where weights may vary within and across firms. Despite common shocks, compensation benchmarking can undo performance benchmarking, so that wages load positively rather than...