How malleable are preferences? This paper provides experimental evidence on the extent to which insurance sellers can influence buyers and whether mandatory information disclosure offsets these effects. The experiment involves 214 subjects seeking or recently obtaining unsecured loans and 25...

In a simple model of the consumer credit market, we show that asymmetric information may enhance welfare relative to full information. The advantage of hidden types is that solvency and default constraints are relaxed, allowing beneficial lending. Prohibiting the use of observable information...

This paper shows that coordination failure and contractual incompleteness can lead to socially excessive investment. Firms and workers choose investment levels then enter a stochastic matching process. If investment levels are discrete, then if match frictions are low enough, high investing...

It is shown that uni-dimensional adverse selection may result in market expansion beyond the full-information level. Although bad types tend to drive out good, enough good types may remain to draw in excessive numbers of bad types. As a result, the welfare loss from adverse selection is...

The equilibrium of a competitive market in which firms must choose prices ex ante and demand is stochastic is shown to be second-best inefficient. Even under risk neutrality, equilibrium price exceeds the welfare-maximising predetermined price. Competition tends to eliminate rationing, but at...

This paper shows that when agents on both sides of the market are heterogeneous, varying in their costs of investment, ex ante investments by firms and workers (or buyers and sellers more generally) may be too high when followed by stochastic matching and bargaining over quasi-rents. The...

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Much writing in the field of strategic management remains an exercise in comparative statics. Cross-sectional research designs are combined with the static metaphors of contingency thinking to analyse the fit between the positioning and resource base of the firm and its performance in differing...

The social justice paradigm, developed in philosophy by John Rawls and others, reaches limits when confronted with diverse populations, unsound governments, and global markets. Its parameters are further limited by a traditional utilitarian approach to both industrial actors and consumer...

Within an asymmetric information set-up in which individuals di¤er in terms of their risk aversion and can choose whether or not to take preventative action, we illustrate in a uni…ed framework the equilibrium possibilities with stand-alone long-term care insurance and annuity contracts. With...