It is often the case that banks in the US are willing to borrow in the fed funds market (the interbank market for funds) at higher rates than the ones they could obtain by borrowing at the Fed's discount window. This phenomenon is commonly explained as the consequence of the existence of a...

This paper examines an adverse selection economy in which efficient resource allocation is supported by intermediary contracts (coalitions). Agents differ along an ex ante publicly observable dimension, so that the equilibrium arrangement yields a diverse set of financial arrangements among...

We reexamine the core in the adverse selection insurance economy first studied by Rothschild and Stiglitz (1976). Defining blocking in a way that takes private information into account, the core is sometimes empty. We define the coalition-proof core as the set of allocations which are blocked...

Alternative payment instruments are studied in an economy with private information, delayed communication, and limited commitment. Attention is restricted to checks and bank drafts, which differ in resource cost and communication characteristics. Checks are less costly but settlement delays...

This paper examines an economy in which agents with private information about their own productive capabilities seek to raise capital to fund their investment projects. We employ an equilibrium concept which is closely related to Coalition Proof Nash Equilibrium. In equilibrium, all agents who...

We examine a model of the size distribution and growth of firms whereby firms learn about idiosyncratic productivity parameters. Aggregate shocks, by adding noise to learning at the firm level, can produce differentiated response across firms with their reactions depending on the position of the...