We model trading and information diffusion in OTC markets, when dealers can engage in many bilateral transactions at the same time. We show that information diffusion is effective, but not efficient. While each bilateral price partially reveals all dealers' private information after a single...

Payments for ecosystem service outputs have become a popular policy prescription for a range of agri-environmental schemes. The focus of this paper is on the choice of sets of instruments in an ecosystem service principal-agent model that addresses adverse selection and moral-hazard. Results...

We study equilibria in second price auctions when bidders are independently and privately informed about both their values and participation costs and their joint distributions across bidders are not necessarily identical. We show that there always exists an equilibrium in this general setting...

Economic theory predicts that private information on risks in insurance markets leads to adverse selection. To counterbalance private information insurers collect and use information on applicants to assess their risk and calculate premiums in an underwriting process. Using data from the English...

A large literature showed that small firms experience difficulties in accessing the credit market due to informational asymmetries; these may be mitigated by collateral or relationship lending, possibilities often precluded to small business. We investigate the effect on small business finance...

Collateral is one of the most important features of a debt contract. A substantial theoretical literature motivates the use of collateral as a means to alleviate ex-ante and ex-post information asymmetries between borrowers and lenders and the incidence of credit rationing. Through its seniority...

Networks can have an important effect on economic outcomes. Given the complexity of many of these networks, agents will generally not know their structure. We study the sensitivity of game-theoretic predictions to the specification of players’ (common) prior on the network in a setting where...