Conventional wisdom says that economic surplus is created when the cost of litigation is foregone in favor of settlement, a theory flowing from the Coase Theorem. The cost-benefit analysis weighs settlement against the expected value of litigation net of transaction cost. This calculus yields...

The Coase Theorem is analyzed in a setting in which pollution damages are a stochastic function of emissions and of natural environmental variability (e.g., weather). When pollution damages are stochastic, emissions create financial risks. Pollution levels allowed under Coasian contracts then in...

The Coase Theorem is analyzed in a setting in which pollution damages are a stochastic function of emissions and of natural environmental variability (e.g., weather). When pollution damages are stochastic, emissions create financial risks. Pollution levels allowed under Coasean contracts then in...

The Expected Shortfall (ES) is one of the most important regulatory risk measures in finance, insurance, and statistics, which has recently been characterized via sets of axioms from perspectives of portfolio risk management and statistics. Meanwhile, there is large literature on insurance...

This chapter studies how incomplete information helps accommodate frictions in coordination, leading to novel insights on the joint determination of expectations and macroeconomic outcomes. We review and synthesize recent work on global games, beauty contests, and their applications. We...

We conduct a contest experiment where participants can invest in increasing both the mean and the spread of an uncertain performance variable. Subjects are treated with different prize schemes and in accordance with theory we observe substantial investments in spread. We find that both types of...

In this article I analyze strategic investment under uncertainty in a new market, where firms face a tradeoff between commitment and flexibility. The model predicts asymmetric equilibria under fairly general conditions, even though firms are ex ante identical and have symmetric opportunities to...

This chapter studies how incomplete information helps accommodate frictions in coordination, leading to novel insights on the joint determination of expectations and macroeconomic outcomes. We review and synthesize recent work on global games, beauty contests, and their applications. We...

We leverage the small open economy Switzerland as a testing ground for basic premises of macroeconomic models of endogenous information acquisition, using tailored surveys of firms and households. First, we show that firms perceive a greater exposure to exchange rate movements than households,...