A 'folk theorem' originating, among others, in the work of Stiglitz maintains that competitive equilibria are always or 'generically' inefficient (unless contracts directly specify consumption levels as in Prescott and Townsend, thus bypassing trading in anonymous markets). This paper critically...

This paper studies equilibria for economies characterized by moral hazard (hidden action), in which the set of contracts marketed in equilibrium is determined by the interaction of financial intermediaries. The crucial aspect of the environment that we study is that intermediaries are restricted...

Optimal voting rules have to be adjusted to the underlying distribution of preferences. However, in practice there usually is no social planner who can perform this task. This paper shows that the introduction of a stage at which agents may themselves choose voting rules according to which they...

Principal-agent models in which the agent has access to private information before a contract is signed are a cornerstone of contract theory. We have conducted an experiment with 720 participants to explore whether the theoretical insights are reflected by the behavior of subjects in the...

A central insight of agency theory is that when a principal offers a contract to a privately informed agent, the principal trades off ex post efficiency in the bad state of nature against a larger profit in the good state of nature. We report about an experiment with 508 participants designed to...

We analyze how transparency affects information acquisition in a bargaining context, where proposers may chose to purchase information about the unknown outside option of their bargaining partner. Although information acquisition is excessive in all our scenarios we find that the bargaining...

There is a large consensus among international institutions and national governments to favor urban-containment policies - the compact city - as a way to improve the ecological performance of the urban system. This approach overlooks a fundamental fact: what matters for the ecological outcome of...

This paper studies the implications of cross-border financial integration for financial stability when banks' loan portfolios adjust endogenously. Banks can be subject to sectoral and aggregate domestic shocks. After integration they can share these risks in a complete interbank market. When...

Two forces have reshaped global securities markets in the last decade: Exchanges operate at much faster speeds and the trading landscape has become more fragmented. In order to analyze the positive and normative implications of these evolutions, we study a framework that captures (i)...

We study in the laboratory, a variant of the house allocation with existing tenants problem where agents are partitioned into tiers with different privileges. Members of higher tiers receive their allocation before those in lower tiers and can also take the endowment of a member of a lower tier...