We study the economic role of banks’ soft information, which evolved from repeated lending relationships, in the context of loan default. Using a proprietary database from one of the largest state-owned commercial banks in China, we find that the bank’s internal credit rating scores play a...

In repeated games with differential information on one side, the labelling "general case" refers to games in which the action of the informed player is not known to the uninformed, who can only observe a signal which is the random outcome of his and his opponent's action. Here we consider the...

A sophisticated player is an individual who takes the action of the opponents, in a strategic situation, as determined by decision of rational opponents, and acts accordingly. A sophisticated agent is rational in the choice of his action, but ignores the fact that he is part of a strategic...

This paper constructs a macro-finance model with two types of borrowers: entrepreneurs who engage in productive activities and gamblers who play in lotteries. It links a central bank's interest rate policy to expected cash ows of both types of borrowers. Via this link we study how the...

We study the functioning and possible breakdown of the interbank market due to asymmetric information about counterparty risk. We allow for privately observed shocks to the distribution of asset risk across banks after the initial portfolio of liquid and illiquid investments is chosen. Our model...

We propose a model in which firms involved in trading securities overinvest in financial expertise. Intermediaries or traders in the model meet and bargain over a financial asset. As in the bargaining model in Dang (2008), counterparties endogenously decide whether to acquire information, and...

Using a simple dynamic consumption-based asset pricing model, this paper explores the implications of a representative investor with smooth ambiguity averse preferences [Klibano¤, Marinacci and Mukerji, Econometrica (2005)] and provides a comparative analysis of risk aversion and ambiguity...

Nowadays many employers offer their employees the possibility of an insurance against too large losses in income when retiring or becoming disabled. This paper models the optimization problem of the employer when setting up such a so-called pension fund. not surprisingly, it turns out that the...

This paper presents a principal-agent model where the agent has multiple, or imprecise, beliefs. We model this situation formally by assuming the agent's preferences are incomplete. One can interpret this multiplicity as an agent's limited knowledge of the surrounding environment. In this...

We compare communication about private information to communication about actions in a one- shot 2-person public good game with private information. The informed player, who knows the exact return from contributing and whose contribution is unobserved, can send a message about the return or her...