We extend the standard model of general equilibrium with incomplete markets to allow for default and punishment by thinking of assets as pools. The equilibrating variables include expected delivery rates, along with the usual prices of assets and commodities. By reinterpreting the variables, our...

The electronic mail game of Rubinstein (1989) showed that a lack of common knowledge generated by faulty communication can make coordinated action impossible. This paper shows how this conclusion is robust to having a more realistic timing structure of messages, more than two players who meet...

The possibility of default limits available liquidity. If the potential default draws nearer, a liquidity crisis may ensue, causing a crash in asset prices, even if the probability of default barely changes, and even if no defaults subsequently materialize. Introducing default and limited...

A large literature uses matching models to analyze markets with two-sided heterogeneity, studying problems such as the matching of students to schools, residents to hospitals, husbands to wives, and workers to firms. The analysis typically assumes that the agents have complete information, and...

We consider situations where legal liability yields insufficient incentives for socially efficient behavior, e.g., individuals who cause harm are not always sued or are unable to pay fully for harm done. Some individuals nevertheless behave efficiently because of intrinsic prosocial concerns....

Using a unique, hand-collected data set on hedging activities of 150 US oil and gas producers, we study the determinants of hedging strategy choice. We also examine the economic effects of hedging strategy on firms’ risk, value and performance. We model hedging strategy choice as a multi-state...

We study learning in perfect competition. A representative price-taking firm sells a good whose quality is unknown to some buyers. The uninformed buyers use the price to infer information about quality. Even though the firm is a price-taker, information is disseminated though the price. It is...

This paper investigates how firms design the maturity of their hedging programs, and the real effects of maturity choice on firm value and risk. Using a new dataset on hedging activities of 150 U.S. oil and gas producers, we find strong evidence that hedging maturity is influenced by investment...

We embed learning (without experimentation) in optimal growth. We extend the Mirman-Zilcha results of stochastic optimal growth to the learning case. We use recursive methods to study the effect of learning on the dynamic program by considering the case of iso-elastic utility and linear...