This paper analyzes the welfare implications of information aggregation in a security-trading model where traders have both idiosyncratic endowment risk and asymmetric information about security payoffs. In the model a large market can be welfare-reducing --- i.e., the optimal market size is...

Can belief shocks make trading excessive? We present a dynamic inventory management model in which belief shocks gradually propagate across traders, leading to the inflated trading activity which reduces traders' welfare. Trading can be socially beneficial because smoothing heterogeneous asset...

We present a competitive model of takeovers among heterogeneous firms. Each firm owns a tradeable "project" and non-tradeable "skill". The complementarity between them generates takeovers. We construct an equilibrium with two segmented markets. In one market, firms pay a fee to an intermediary...