This paper studies how options trading, by circumventing constraints on borrowing, permits optimistic investors to hold the desired portfolio. Unconstrained investors proceed to a portfolio rebalancing by constructing a zero-income portfolio that consists of a short position in the option, a...

Gârleanu et al. (RFS 2009) show that a demand pressure phenomenon exists in option markets due to limit to arbitrage. They assert that if arbitrage is perfect, option demand does not impact option price. In this note we show that there is a positive relation between the demand for a redundant...

This paper extends the prey--predator model of Grossman and Kim (1995) to analyze the relation between the value of the contested rent and the emergence of a conflict. We show that an increase in the value of the rent makes the conflict equilibrium more likely. We also analyze the case where the...

This paper extends the prey--predator model of Grossman and Kim (1995) to analyze the relation between the value of the contested rent and the emergence of a conflict. We show that an increase in the value of the rent makes the conflict equilibrium more likely. We also analyze the case where the...

Schmalensee (1974) shows that, when the cost functions of the advertising e¤ort are linear, the monopoly position is only sustained when the advertising�s e¤ectiveness of the incumbent is relatively high. We show that this result does not hold in a more general nonlinear cost. The no-entry...

We analyze the relationship between market size and entry when an incumbent and a potential entrant compete to gain market share and advertising is the only strategic variable. Entry occurs when the relative effectiveness of incumbent's advertising is smaller than a threshold level that depends...