Venture capitalists enjoy incentive-laden compensation schemes where they are paid a fixed amount (management fees) plus a share of profit (success fees). This scheme is of course intended to provide venture capitalists with strong incentives under the heavy information asymmetry (Sahlman, 1982,...

Abstract Mandatory convertibles, which are equity-linked hybrid securities that automatically convert to common stock on a pre-specified date, have become an increasingly popular means of raising capital in recent years (about $20 billion worth issued in 2001 alone). This paper presents the...

We examine the dynamic forecasting behavior of security analysts in response to their prior performance relative to their peers within a continuous time/multi-period framework. Our model predicts a U-shaped relationship between the boldness of an analyst's forecast, that is, the deviation of her...

Consider the case of a firm with private valuation information bargaining with a supplier over the price and quantity of a good. If the firm and the supplier bargain directly, the bargaining outcome may not yield a first-best outcome due to the presence of information rents. The question we...

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....

We examine the impact of public information in an economy where agents also have diverse private information. Our work builds on seminal contributions by Townsend (1983) and Phelps (1983), and more recently Woodford (2002), which emphasized the importance of higher-order beliefs – that is,...

Sellers benefit on average from revealing information about their goods to buyers, but the incentive to exaggerate undermines the credibility of seller statements. When multiple goods are being auctioned, we show that ordinal cheap talk, which reveals a complete or partial ordering of the...

We study optimal nominal demand policy in a flexible price economy with monopolistic competition where firms have imperfect common knowledge about the shocks hitting the economy. Information imperfections emerge endogenously because firms are assumed to have finite (Shannon) capacity to process...

Existence of monotone pure strategy equilibrium is established in the discriminatory and uniform S + a-th price (a in [0, 1]) auctions of S identical objects when bidders are risk-neutral with independent signals. The model requires discrete price / quantity grids and allows for...

A possible view of the role of an adjudicator is that it is to obtain the information that is needed to apply a well-articulated legal rule. That is, the task of an adjudicator in a case is to gather and verify the information that is called for to employ a legal rule, but that once the required...