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...

Limited liability and asymmetric information between an investment bank and its lenders provide an incentive for a bank to undercapitalise and finance overly risky business projects. To counter this market failure, national governments have imposed solvency constraints on banks. However, these...

This paper provides a rationale for equal sharing in heterogeneous partnerships. We introduce project choice and information sharing to a standard team production setting. A team with two agents can choose whether they want to work on a status quo project or on an alternative project. If the...

Under asymmetric information, dishonest sellers lead to market unraveling in the lemons model. An additional cost of dishonesty is that language becomes cheap talk. We develop instead a model where people derive utility from actions (what they say), as well as from outcomes, so talk is costly....

We extend the comparison of experiments in Blackwell (1953) to a strategic setting that both simplifies and expands upon ideas in Gossner (2000). We introduce a partial order on correlating signals, called more strategically informative, and prove that it is equivalent to the partial order more...

We propose a criterion of stability for two-sided markets with asymmetric information. A central idea is to formulate matching functions, off-path beliefs conditional on counterfactual pairwise deviations, and on-path beliefs in the absence of such deviations. A matching-belief configuration is...