Related papers: Zero-Leverage Puzzle
We consider the problem of merchant storage participating in the regulation market with state-of-charge (SoC) dependent bids. Because storage can simultaneously provide regulation up and regulation down capacities, the market-clearing…
General equilibrium, the cornerstone of modern economics and finance, rests on assumptions many markets do not meet. Spectrum auctions, electricity markets, and cap-and-trade programs for resource rights often feature non-convexities in…
Errors-in-variables is a long-standing, difficult issue in linear regression; and progress depends in part on new identifying assumptions. I characterize measurement error as bad-leverage points and assume that fewer than half the sample…
The origin of economic crises is a key problem for economics. We present a model of long-run competitive markets to show that the multiplicity of behaviors in an economic system, over a long time scale, emerge as statistical regularities…
This paper offers a strategic rationale for zero-sum thinking in elections. We show that asymmetric information and distributional considerations together make voters wary of policies supported by others. This force impels a majority of…
We study financial networks where banks are connected through bilateral liabilities and may default when resources are insufficient to meet obligations. We consider both the standard proportional clearing model and a priority-proportional…
Equity premium, the surplus returns of stocks over bonds, has been an enduring puzzle. While numerous prior works approach the problem assuming the utility of money is invariant across contexts, our approach implies that in efficient…
Why do division and cohesion often intensify together? This paper develops a static structural theory of relation maintenance based on minimal positional constraints. Rather than relying on utility-based or probabilistic models, social…
Linear contracts are ubiquitous in practice, yet optimal contract theory often prescribes complex, nonlinear structures. We provide a distributional robustness justification for linear contracts. We study a principal-agent problem where the…
This paper develops a dynamic equilibrium model of the insurance market that jointly characterizes insurers' underwriting, investment, recapitalization, and dividend policies under model uncertainty and financial frictions. Competitive…
We derive the arbitrage gains or, equivalently, Loss Versus Rebalancing (LVR) for arbitrage between \textit{two imperfectly liquid} markets, extending prior work that assumes the existence of an infinitely liquid reference market. Our…
In this paper we model a game such that all strategies are non-revealing, with imperfect recall and incomplete information. We also introduce a modified sliding-block code as a linear transformation which generates common knowledge of how…
We present a comprehensive review of the physical behavior of yield stress materials in soft condensed matter, which encompass a broad range of materials from colloidal assemblies and gels to emulsions and non-Brownian suspensions. All…
We study the portfolio selection problem of a long-run investor who is maximising the asymptotic growth rate of her expected utility. We show that, somewhat surprisingly, it is essentially not affected by introduction of a floor constraint…
Economic withholding in electricity markets refers to generators bidding higher than their true marginal fuel cost, and is a typical approach to exercising market power. However, existing market designs require storage to design bids…
The communications systems, terminals, software and deployment service, industries, have undergone the past ten years a significant technological internal evolution and external revolution at customer end (such as Internet, Mobile networks…
We study the conditions under which input-output networks can dynamically attain a competitive equilibrium, where markets clear and profits are zero. We endow a classical firm network model with minimal dynamical rules that reduce…
Financial networks help firms manage risk but also enable financial shocks to spread. Despite their importance, existing models of financial networks have several limitations. Prior works often consider a static network with a simple…
Zero-Liquidation loans allow DeFi users to borrow USDC against their ETH holdings, but without the risk of being liquidated in case of LTV shortfalls. This is achieved by giving users the option to repay their loans, either in USDC or…
Recent studies have found evidence of a negative association between economic complexity and inequality at the country level. Moreover, evidence suggests that sophisticated economies tend to outsource products that are less desirable (e.g.…