The U.S. Constitution includes many checks and balances that necessitate the ruling party to compromise with the opposition. I develop a model in which this feature prompts the President to compromise on the strength of the candidates nominated for positions in the federal government and...

Individuals have an increased incentive to invest when they know that they can sell their investments whenever they need funds. However, such an increase in investments reduces the returns by exacerbating the negative externalities individuals impose on each other whenever they invest. As a...

The U.S. Constitution includes many checks and balances that necessitate the ruling party to compromise with the opposition. I develop a model in which this feature prompts the President to compromise on the strength of the candidates nominated for positions in the federal government and...

When a banker’s actions are not observable, depositors demand compensation proportional to the risk the banker takes in equilibrium. Deposit insurance reduces the banker’s liability by eliminating such compensation. This reduced liability gives the banker greater incentive to invest in...

We study contagion in a financial network of commonly held assets where intermediaries act strategically. We show that increases in concentration and integration, two measures of connection density, enhance the network’s capacity to prevent failures following a shock yet can cause sharp...