Showing 1 - 10 of 23
For many goods (such as experience goods or addictive goods), consumers' preferences may change over time. In this paper, we examine a monopolist's optimal pricing schedule when current consumption can affect a consumer's valuation in the future and valuations are unobservable. We assume that...
Persistent link: https://www.econbiz.de/10011426890
The current crisis and its high social cost have shattered the confidence of economic agents in the banking system and questioned the capacity of financial markets to channel resources to their best use. While it is essential for the well functioning of economic activity that financial...
Persistent link: https://www.econbiz.de/10011423601
The collapse of AAA‐rated structured finance products in 2007 to 2008 has brought renewed attention to conflicts of interest in credit rating agencies (CRAs). We model competition among CRAs with three sources of conflicts: (1) CRAs conflict of understating risk to attract business, (2)...
Persistent link: https://www.econbiz.de/10011425275
An individual’s decision about how much to save depends on her perception of how current savings affects future well-being. Fatalistic individuals believe that they have little or no control over future outcomes. We develop a theoretical model linking fatalism to savings and test the...
Persistent link: https://www.econbiz.de/10011425276
The financial crisis has brought a new focus on the accuracy of credit rating agencies (CRAs). In this paper, we highlight the incentives of analysts at the CRAs to provide accurate ratings. We construct a model in which analysts initially work at a CRA and can then either remain or move to a...
Persistent link: https://www.econbiz.de/10011425277
Credit rating agencies (CRAs) have long held that reputational concerns discipline their behavior. The value of reputation, however, depends on economic fundamentals that vary over the business cycle. In a model of ratings incorporating endogenous reputation and a market environment that varies,...
Persistent link: https://www.econbiz.de/10011425282
This paper studies the connection between risk taking and executive compensation in financial institutions. A theoretical model of shareholders, debtholders, depositors, and an executive suggests that 1) in principle, excessive risk taking (in the form of risk shifting) may be addressed by...
Persistent link: https://www.econbiz.de/10011426625
A regulator resolving a bank faces two audiences: depositors, who may run if they believe the regulator will not provide capital, and banks, which may take excess risk if they believe the regulator will provide capital. When the regulator's cost of injecting capital is private information, it...
Persistent link: https://www.econbiz.de/10011426626
A regulator resolving a bank faces two audiences: depositors, who may run if they believe the regulator will not provide capital, and banks, which may take excess risk if they believe the regulator will provide capital. When the regulator's cost of injecting capital is private information, it...
Persistent link: https://www.econbiz.de/10011426880
This article studies the connection between risk taking and executive compensation in financial institutions. A model of shareholders, debtholders, depositors, and an executive demonstrates that (i) excess risk taking can be addressed by basing compensation on both stock price and the credit...
Persistent link: https://www.econbiz.de/10011426881