This paper studies an auction model in which one of the bidders, the insider, has better information about a common component of the value of the good for sale, than the other bidders, the outsiders. Our main result shows that the insider may have incentives to disclose her private information...

One of the most striking results in experimental economics is the ease with which market bubbles form in a laboratory setting and the difficulty of preventing them. This article re-examines bubble experiments in light of the results of an earlier series of market experiments that examine how...

Many couples do not sign prenuptial agreements, even though this often leads to costly and inefficient litigation in case of divorce. In this paper we show that strategic reasons may prevent agents from signing a prenuptial agreement. Partners which have high productivity in marital activities...

This paper studies how the trade size and the historical sequence of trades affect bid-ask spreads, investors’ trading strategies, and the market maker’s learning process in a multi-period economy. First, we show that there is a nonzero cut-off size below which informed traders never buy or...

Among practitioners, inventory is often thought to be the root of all evil in operations management. The stock market hates it, the media abhors it, and managers have come to fear it. But high inventory levels can also be the result of strategic buying and high-availability strategies. The...

We analyze optimal trading mechanisms in environments where each trader owns some units of a good to be traded and may be either a seller or a buyer, depending on the realization of privately observed valuations. First, the concept of virtual valuation is extended to ex ante unidentified...

Suppose an entrepreneur needs funds from a financier to invest in a risky project whose cost is fixed, and whose return may be high or low. Suppose also that the project's realized return is an information that is private to the entrepreneur. If the amount the entrepreneur pays back to the...

The recent automobile liability insurance crisis in Atlantic Canada has prompted the four provincial legislations (Newfoundland and Labrador, New Brunswick, Nova Scotia and Prince Edward Island) to setup a task force to redesign, if necessary, the personal automobile insurance system. After...

When potential shareholders cannot observe the business conditions of the firms, the latter desiring to acquire capital by an IPO and operating under less favourable business conditions have a strong incentive to appear more successful.