In a class of informed principal problems with common values often used in applications we define a particular mechanism which we call the assured allocation. It is always undominated, i.e. efficient among the different types of the principal. We show it is a perfect Bayesian equilibrium...

A principal who has a project with uncertain returns must retain and incentivize an agent using promise of future payments and information control. The agent's effort produces output and facilitates information gathering. The principal controls the informativeness of the agent's effort by...

Most firms issue financial assets such as debt or equity (e.g. bonds or stock) to outside investors. While these financial assets differ greatly in their characteristics, their diversity has received little attention in the literature. Filling this important gap in the literature, this paper...

I model a benevolent planner who motivates a time-inconsistent agent by only committing to provide feedback. The optimal feedback mechanism always takes the simple form of recommending an action. I also provide conditions for when the optimal feedback mechanism takes the simple form of a cutoff....

We study how interest alignment between CEOs and corporate boards influences investment efficiency and identify a novel force behind the benefit of misaligned preferences. Our model entails a CEO who encounters a project, gathers investment-relevant information, and decides whether or not to...

In Bayesian environments with private information, as described by the types of Harsanyi, how can types of agents be (statistically) disassociated from each other and how are such disassociations reflected in the agents’ knowledge structure? Conditions studied are (i) subjective independence...

This paper performs a welfare analysis of economies with private information when public information is endogenously generated and agents can condition on noisy public statistics in the rational expectations tradition. We find that equilibrium is not (restricted) efficient even when feasible...

This paper performs a welfare analysis of economies with private information when public information is endogenously generated and agents can condition on noisy public statistics in the rational expectations tradition. We find that equilibrium is not (restricted) efficient even when feasible...

Sudden big price changes are followed by periods of high and persistent volatility. I develop a tractable dynamic rational expectations model consistent with this observation. An infinity of agents possess dispersed information about future dividends and trade in centralized markets. Information...

Attainment of rational expectations equilibria in asset markets calls for the price system to disseminate traders' private information to others. It is known that markets populated by asymmetrically-informed profit-motivated human traders can converge to rational expectations equilibria. This...