This dissertation provides theoretical and empirical support for the mechanism of market discipline as an alternative channel complementing supervisory efforts of prudential regulation. The model introduced in the first part is based on a novel risk-return technology that summarizes the lending...

This dissertation includes three essays on decision-making by boundedly rational economic agents. The first essay deals with decision-making by firms where decision-making is costly. The other two essays deal with decision-making by individuals. Taken together, the last two argue that...