Interactions between players with private information and opposed interests are often prone to bad advice and inefficient outcomes, e.g. markets for financial or health care services. In a deception game we investigate experimentally which factors could improve advice quality. Besides advisor...

In the model there are two types of financial auditors with identical technology, one of which is endowed with a prior reputation for honesty. We characterize conditions under which there exists a "two-tier equilibrium" in which "reputable" auditors refuse bribes offered by clients for fear of...

In early 2019, the stock prices of the German company Wirecard AG experienced market turmoil after several critical reports on activities claimed to be illegal. To analyze the market impact of news, we use stock price data for Wirecard AG and apply the reversed news model. We elaborate on...

stock market crash on hedging strategies by portfolio insurers, which dictated selling stocks as soon as prices fell. The fact that the practice of buying and selling stocks as portfolio insurance has virtually disappeared since then has given many comfort that a replay of the 1987 crash, when...

The authors demonstrates that, in contrast to optimistic investors, pessimistic investors may strictly prefer investing in an illiquid asset toinvesting in a liquid asset.

Financial markets help to foster growth and productivity through their role in mobilizing savings to finance investment and production, selecting and monitoring investment projects, diversifying risks, and allowing investment and production to be carried out in the most productive scale and time...

We develop and analyse a simple general equilibrium model withcapital market imperfections We find that the impact of monetarypolicy on real economic activity depends on the initial distributionof wealth in the economy. Changes in the opportunity cost of fundsaffect not only the choice of...

This note analyses investment and risk-taking in a simple agency model of public regulation/procurement borrowed from Laffont & Tirole (1993). We show that the principal will overinvest or underinvest depending on whether investment is marginally more productive in bad or in good states. Due to...

Crowdfunding provides innovation in enabling entrepreneurs to contract with consumers before investment. Under aggregate demand uncertainty, this improves screening for valuable projects. Entrepreneurial moral hazard and private cost information threatens this benefit. Crowdfunding's...

In markets with quality unobservable to buyers, third-party certification is often the only instrument to increase transparency. While both sellers and buyers have a demand for certification, its role differs fundamentally: sellers use it for signaling, buyers use it for inspection. Seller...