We propose a dynamic heterogeneous agents model which generates testable hypotheses about the formation, timing and bursting of asset price bubbles in the presence of short-sale constraints, given a calibration that is consistent with momentum and reversal effects for unconstrained assets....

We develop a model of information exchange through communication and investigate its implications for information aggregation in large societies. An underlying state determines payoffs from different actions. Agents decide which others to form a costly communication link with incurring the...

We study information acquisition and dynamic withdrawal decisions when a spreading rumor exposes a solvent bank to a run. Uncertainty about the bank's liquidity and potential failure motivates depositors who hear the rumor to acquire additional noisy signals. Depositors with less informative...

We analyze a model of informed trading where an activist shareholder accumulates shares in an anonymous market and then expends costly effort to increase the firm value. We find that equilibrium prices are affected by the position accumulated by the activist, because the level of effort...

Short-term debt that can serve as a medium of exchange is designed to be information insensitive. No one should be tempted to acquire private information to gain an informational advantage in trading that could destabilize the value of the debt. Short-term debt minimizes the incentive to acquire...

The main features of households' attention to savings are rationalized by a model of information aversion, a preference-based fear of receiving flows of news. In line with the empirical evidence, information averse investors observe the value of their portfolios infrequently; inattention is more...

We examine misconduct in credence good markets with price taking experts. We propose a market-level model in which price-taking experts extract surplus based on the value of their firm's brand and their own skill. We test the predictions of the model using sales complaint data for exclusive and...

We calculate equilibria of dynamic double-auction markets in which agents are distinguished by their preferences and information. Over time, agents are privately informed by bids and offers. Investors are segmented into groups that differ with respect to characteristics determining information...

Recurrent intervals of inattention to the stock market are optimal if consumers incur a utility cost to observe asset values. When consumers observe the value of their wealth, they decide whether to transfer funds between a transactions account from which consumption must be financed and an...