The current debate on the new Basel Accord gives rise to a natural question about the appropriate form of capital regulation.We construct a simple framework to analyze this issue. In our model the risk carried by a bank as well as managerial risk preference are a bank's private information. We...

I analyze the incentive for costly information collection in a multi-unit commonvalue uniform-price auction in which bidders submit demand functions. I show that so long as there are some bidders who have a very high cost of information collection, even if there are a large number of other...

We propose a simple theory of trade credit and prepayment. A downstream firm trades off inventory holding costs against lost sales. Lost final sales impose a negative externality on the upstream firm. We show that allowing the downstream firm to pay with a delay, an arrangement known as “trade...

Multi-unit common value uniform price auctions with demand function bids are in widespread use. I analyze this auction when there is an informed bidder and other uninformed bidders. In such auctions it is easy to construct equilibria in which uninformed bidders earn a positive payoff by free...

We characterize the optimal selling mechanism in a scenario where similar goods are sold to “high end” buyers through a posted price and to “lower end” buyers through an auction. We show that the optimal mechanism involves an auction which is a standard optimal auction (Myerson (1981))...

If entrepreneurs have private information about factors influencing the outcome of an investment, individual lending is inefficient. The literature emphasizes improvements through non-market organizations that harness local information through peer monitoring. I investigate the complementary...