Diversification through a financial intermediary has the benefit of transforming loans that need costly monitoring into bank deposits that do not. We show that financial intermediation in a costly state verification model has a cost not yet analyzed: it allows for the existence of multiple...

The endowment effect, the tendency to value possessions more than non-possessions, is a well known departure from rational choice and has been replicated in numerous settings. We investigate the universality of the endowment effect, its evolutionary significance, and its dependence on...

This paper considers a simple equilibrium model of an imperfectly competitive two-sided matching market. Firms and workers may have heterogeneous preferences over matches on the other side, and the model allows for both uniform and personalized wages or contracts. To make the model tractable, I...

In an economy with indivisible goods, a continuum of agents and quasilinear utility, we show that equilibrium exists regardless of the nature of agents' preferences over bundles. This contrasts with results for economies with a finite number of agents, which require restrictions on preferences...

This paper considers the problem of a risk-neutral firm offering a gamble to consumers with preferences given by prospect theory. Under conditions satisfied by virtually all functional forms used in the literature, firms can extract arbitrarily high expected values from consumers. Moreover, for...

This paper considers a model of legislative decision-making, in which information must be collected from a strategic lobbyist. The legislature appoints a committee to communicate with the lobbyist and propose a bill, and determines whether the proposal is processed under open or closed rule....