Bianchi, Milo; Jehiel, Philippe - In: Theoretical economics : TE ; an open access journal in … 15 (2020) 2, pp. 545-582
We study banks' incentive to pool assets of heterogeneous quality when investors evaluate pools by extrapolating from limited sampling. Pooling assets of heterogeneous quality induces dispersion in investors' valuations without affecting their average. Prices are determined by market clearing...