We present a model for the equilibrium movement of capital between asset markets that are distinguished only by the levels of capital invested in each. Investment in that market with the greatest amount of capital earns the lowest risk premium. Intermediaries optimally trade off the costs of...

Complex economic problems often lack the structure for the application of standard comparative statics techniques. Generalized Monotonicity Analysis (GMA) extends usual methods in several directions. First, it provides a new way of endogenously generating parameter moves that yield monotonicity....

How do future well-being and preferences affect the current well-being and preferences of forward-looking agents? Our theory explores this question, producing a new class of tractable models which capture and explain phenomena such as present bias, consumption interdependence, sign effects in...

This paper studies performance-sensitive debt (PSD), the class of debt obligations whose interest payments depend on some measure of the borrowers performance. We demonstrate that the existence of PSD obligations cannot be explained by the trade-off theory of capital structure, as PSD leads to...

How do successive, forward-looking agents experiment with interdependent and endogenous technologies? In this paper, trying a radically new technology not only is informative of the value of similar technologies, but also reduces the cost of experimenting with them, in effect expanding the space...

We consider comparative statics of solutions to parameterized optimization problems. A geometric method is developed for finding a vector field that, at each point in the parameter space, indicates a direction in which monotone comparative statics obtain. Given such a vector field, we provide...

In dynamic models driven by di usion processes, the smoothness of the value function plays a crucial role for characterizing properties of the solution. However, available methods to ensure such smoothness have limited applicability in economics, and economists have often relied on either...