We develop a career concerns model in which agents differ in taste for income in addition to ability, and derive basic implications of this framework. We argue that the model captures important aspects of ambition. Since ambitious agents are expected to work harder and therefore be paid more...

We analyze the welfare properties of derivative securities that profit-maximizing issuers offer to investors who have inferior information and neglect the information content of the offer. To capture the markets for structured securities and exotic exchange-traded funds, we assume that issuers...

We study the properties of a profit-maximizing monopolist's optimal price distribution when selling to a loss-averse consumer, where (following Köszegi and Rabin (2006)) we assume that the consumer's reference point is her recent rational expectations about the purchase. If it is close to...

Many consumers care about climate change and other externalities associated with their purchases. We analyze the behavior and market effects of such "socially responsible consumers" in three parts. First, we develop a flexible theoretical framework to study competitive equilibria with rational...