Showing 1 - 10 of 103
We study the loan contracing problem of Gale and Hellwig (1985) under general assumptions of risk aversion and possibly diverse subjective beliefs of the borrower and lender about the income of the investment. We characterize the optimal contract and show that (i) the contractual payoff in...
Persistent link: https://www.econbiz.de/10005342338
The no trade principle asserts that risk-neutral agents are not prepared to trade if and only if a common prior exists. The purpose of this article is to provide general versions of this principle. We first study the case when no topological assumption is made on the state space. Bets are...
Persistent link: https://www.econbiz.de/10005342381
Empirical evidence shows that macroeconomic fundamentals have little explana-tory power for nominal exchange rates. On the other hand, the recent “microstruc-ture approach to exchange rates” has shown that most exchange rate volatility at short to medium horizons is related to order flows....
Persistent link: https://www.econbiz.de/10005328945
The paper recognizes that expectations and the process of their formation are subject to standard decision making and are determined as a part of equilibrium. Accordingly, the paper presents a basic framework in which the form of expectation formation is a choice variable. At any point in time...
Persistent link: https://www.econbiz.de/10005328882
Search engines commonly use “sponsored linksâ€, where certain advertisers’ links are promoted to be placed above others in return for monetary payment. It is natural to assume that all providers value a higher ranked placement more than lower ranked ones. Then how should the...
Persistent link: https://www.econbiz.de/10005702600
We develop a model of consulting (advising) where the role of the consultant is that she can reveal signals to her client which refine the client’s original private estimate of the profitability of a project. Importantly, only the client can observe or evaluate these signals...
Persistent link: https://www.econbiz.de/10005702621
In this paper, we study efficient dissolution of partnerships in a context of incomplete information. We generalize the results of Cramton, Gibbons and Klemperer (1987) to situations where the partnership takes on a common value that may depend upon all partners' types, so that each partner's...
Persistent link: https://www.econbiz.de/10005702686
We investigate the issue of implementation via individually rational ex-post budget-balanced Bayesian mechanisms. We demonstrate that all social choice rules that generate a nonnegative ex-ante surplus, including ex-post efficient ones, can generically be implemented via such mechanisms. The...
Persistent link: https://www.econbiz.de/10005342204
This paper studies the implications of black-white differences in uninsurable labor market risk for racial differences in the value of human capital. Two approaches to estimate the value of human capital in the presence of heterogeneous labor market risk and preferences for risk are implemented....
Persistent link: https://www.econbiz.de/10005702689
Punitive damage awards have been widely criticized for generating a plaintiff’s windfall (i.e., a payment in excess of the costs of pursuing the punitive claim), which promotes unnecessary litigation, the escalation of liability insurance premiums and over-deterrence. In an attempt to...
Persistent link: https://www.econbiz.de/10005063694