How do insiders respond to regulatory oversight? History suggests that they form sophisticated networks to share information and circumvent regulation. We develop a theory of the formation and regulation of information transmission networks. We show that agents with sufficiently complex networks...

I develop a framework of the buildup and outbreak of financial crises in an asymmetric information setting. In equilibrium, two distinct economic states arise endogenously: “normal times,” periods of modest investment, and “booms,” periods of expansionary investment. Normal times occur...

I develop a framework of the build-up and outbreak of financial crises in an asymmetric information setting. In equilibrium, two distinct economic states arise endogenously: normal times – periods of modest investment, and booms – periods of expansionary investment. Normal times occur when...

We study a dynamic model of collateralized lending under adverse selection in which the quality of collateral assets is endogenously determined by hidden effort. Complementarities in incentives lead to non-ergodic dynamics: Asset quality and output grow when asset quality is high, but stagnate...

We study a dynamic model of collateralized lending under adverse selection in which the quality of collateral assets is endogenously determined by hidden effort. Complementarities in incentives lead to non-ergodic dynamics: asset quality and output grow when asset quality is high, but stagnate...

How do insiders respond to regulatory oversight on transmissions? History suggests that they form more sophisticated networks to circumvent regulation. We develop a theory of the formation and regulation of transmission networks. We show that agents with sufficiently complex networks bypass any...