There is a general consensus that the root cause of the most recent turmoil in the domestic and global markets is due to a failure in our regulatory system. Yet, Congress has not supported comprehensive regulation related to the day-to-day activities of mortgage brokers and their relationship...

How are contracts formed when agents face uncertainty, have asymmetric information and cannot write binding agreements? In this paper we propose a solution to this problem. Agents can discuss state-contingent allocations but cannot write binding contracts. At any stage in the contract formation...

We study optimal insurance contracts for an agent with Markovian private information. Our main results characterize the implications of constrained efficiency for long-run welfare and inequality. Under minimal technical conditions, there is Absolute Immiseration: in the long run, the...

We study optimal insurance contracts for an agent with Markovian private information. Our main results characterize the implications of constrained efficiency for long-run welfare and inequality. Under minimal technical conditions, there is Absolute Immiseration: in the long run, the agent's...

This paper offers a framework to understand informal financing based on mechanisms to deal with asymmetric information and enforcement. We find that constructive informal financing such as trade credits and family borrowing that relies on information advantages or an altruistic relationship is...

We offer a new test of the ex ante theory of collateral. Theory states that lenders rely less on collateral if they have better information about borrowers. We test this by contrasting the use of collateral between formal and – better informed – informal lenders in a developing financial...

The ex ante theory of collateral states that better informed lenders, such as informal lenders, rely less on collateral. We test this by contrasting the use of collateral between formal and informal lenders in the same market. Indeed, formal lenders rely more often on collateral, controlling for...

Heterogeneously risk-averse individuals who lack access to formal insurance build and use relationships with each other to manage risk. I show that the composition of equilibrium relationships under pairwise matching and when group size is endogenous is determined by a mean-variance trade-off...

This paper provides a general overview of the literature on the core of an exchange economy with asymmetric information. Incentive compatibility is emphasized in studying core concepts at the ex ante and interim stage. The analysis includes issues of non-emptiness of the core as well as core...

An appropriate (interim) notion of the core for an economy with incomplete information depends on the amount of information that coalitions can share. The coarse and fine core, as originally defined by Wilson (1978), correspond to two polar cases, involving no information sharing and arbitrary...