In our model multiple innovators compete against each other by submitting investment proposals to an investor. The investor chooses the least expensive proposal and when to invest in it. Innovators have to provide costly effort and they learn privately the cost of investing. Multiple efforts...

Anecdotal evidence suggests that investor protection affects the demand for equity, but existing theories emphasize only the effect of investor protection on the supply of equity. We build a model showing that the demand for equity is important in explaining financial development. If the level...