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...

It is widely known that loss aversion leads individuals to dislike risk, and as has been argued by many researchers, in many instances this creates an incentive for firms to shield consumers and employees against economic risks. Complementing previous research, we show that consumer loss...

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...