Given the importance of sound advice in retail financial markets and the fact that financial institutions outsource their advice services, how should consumer protection law be set to maximize social welfare? We address this question by posing a theoretical model of retail markets in which a...

The increasing dependence of individuals on debt financing raises several welfare considerations that we analyze in this paper. We develop a dynamic, competitive model of relationship banking to determine how regulation influences borrowing and lending behavior, and analyze how it affects...

We analyze how the work ethic of managers impacts a firm's employment contracts, riskiness, growth potential, and organizational structure. Flat contracts are optimal for diligent managers because they reduce risk-sharing costs, but they attract egoistic agents who shirk and unskilled agents who...

There is mounting empirical evidence to suggest that the law of one price is violated in retail financial markets: there is significant price dispersion even when products are homogeneous. Also, despite the large number of firms in the market, prices remain above marginal cost and may even rise...

Investor sophistication has lagged behind the growing complexity of retail financial markets. To explore this, we develop a dynamic model to study the interaction between obfuscation and investor sophistication in mutual fund markets. Taking into account different learning mechanisms within the...

We develop a theoretical model to study the effects of libertarian paternalism on knowledge acquisition and social learning. Individuals in our model are permitted to appreciate and use the information content in the default options set by the government. We show that in some settings...

Investor sophistication has lagged behind the growing complexity of retail financial markets. To explore this, we develop a dynamic model to study the interaction between obfuscation and investor sophistication. Taking into account different learning mechanisms within the investor population, we...

We develop a theoretical model to analyze the effects of libertarian paternalism on information production and financial decision making. Individuals in our model appreciate the information content of the recommendations made by a social planner. This affects their incentive to gather...