What are the value and form of optimal persuasion when information can be generated only slowly? We study this question in a dynamic model in which a `sender' provides public information over time subject to a graduality constraint, and a decision-maker takes an action in each period. Using a...

We relax the common assumption of homogeneous beliefs in principal-agent relationships with adverse selection. Principals are competitors in the product market and write contracts also on the base of an expected aggregate. The model is a version of a cobweb model. In an evolutionary learning...

We relax the common assumption of homogeneous beliefs in principal-agent relationships with adverse selection. Principals are competitors in the product market and write contracts also on the base of an expected aggregate. The model is a version of a cobweb model. In an evolutionary learning...

The paper solves a puzzle related to unsecured credit and the use of credit scores. With credit scores increasingly present in credit decisions, and with the increased use of credit cards, especially in categories at risk of large negative health shocks, asymmetry of information between banks...

We consider the problem of finding equilibrium asset prices in a financial market in which a portfolio manager (Agent) invests on behalf of an investor (Principal), who compensates the manager with an optimal contract. We extend a model from Buffa, Vayanos and Woolley (2014) by allowing general...

How does the market makers' aversion to unhedgeable risks influence option prices? We answer this question by introducing a new structural approach: deep replication. With this method, we extract the risk aversion of S&P500 options per contract and per day. Cross-sectionally, we show the...

In spite of the importance of optimal contracting problems under moral hazard and adverse selection, current literature offers no optimal solutions to contracting problems under moral hazard and adverse selection with risk averse agents. The agent's risk aversion, however, appears to be critical...

We bring together the theories of duality and dynamic programming. We show that the dual of a separable dynamic optimization problem can be recursively decomposed. We provide a dual version of the principle of optimality and give conditions under which the dual Bellman operator is a contraction...

We propose a generic computational framework for solving large-scale infinite-horizon, discrete-time dynamic incentive problems with persistent hidden types. First, we combine set-valued dynamic programming techniques with unsupervised machine learning to determine irregularly-shaped feasible...

Previous literature documents that mutual funds' flows increase more than linearly with realized performance. I show this convex flow-performance relationship is consistent with a dynamic contracting model in which investors learn about the fund manager's skill. My model predicts that flows...