Over the past several years, environmental economists have been increasingly attracted to the use of information as an alternative to traditional methods for regulating externalities. An example of this approach is "eco-labeling," where a third party certifies firms' products; this approach is...

Who does, and who should initiate costly certification by a third party under asymmetric quality information, the buyer or the seller? Our answer ' the seller ' follows from a non-trivial analysis revealing a clear intuition. Buyer-induced certification acts as an inspection device, whence...

Consider a two-product firm that decides on the quality of each product. Product quality is unknown to consumers. If the firm sells both products under the same brand name, consumers adjust their beliefs about quality subject to the performance of both products. We show that if the probability...

Asymmetric information is a classic example of market failure that undermines the efficiency associated with perfectly competitive market outcomes: the "lemons" market. Credible certification, that substantiates unobservable characteristics of products that consumers value, is often considered a...

We study the implications of overconfidence for price setting in a monopolistic competition setup with incomplete information. Our price-setters overestimate their abilities to infer aggregate shocks from private signals. The fraction of uninformed firms is endogenous; firms can obtain...

We study a dynamic information design problem in a finite-horizon setting consisting of two strategic and long-term optimizing agents, namely a principal (he) and a detector (she). The principal observes the evolution of a Markov chain that has two states, one "good" and one "bad" absorbing...

Asymmetric information is a classic example of market failure that undermines the efficiency associated with perfectly competitive market outcomes: the “lemons” market. Credible certification, that substantiates unobservable characteristics of products that consumers value, is often...

Bank runs may serve to communicate information across agents, and thus enhance rather than thwart allocation efficiency by making the fundamentals determine the asset prices. Figuratively speaking, banks die (go bankrupt) singing a swan song (revealing hidden information). In this way bank runs...

This paper explores the interaction between insider trading and seasoned equity offering in the context of Myers and Majluf (1984). Private information conveyed through trading activities may mitigate information asymmetry and improve capital market efficiency. Moreover, an insider has less...