Related papers: The Screening Cost of Liquidity

We study the identification and estimation of a multidimensional screening model, where a monopolist sells a multi-attribute product to consumers with private information about their multidimensional preferences. Under optimal screening,…

Inheritances, divorces or liquidations of companies require common assets to be divided among the entitled parties. Legal methods usually consider the market value of goods, while fair division theory takes into account the parties'…

A principal and an agent divide a surplus. Only the agent knows the surplus' true size and decides how much of it to reveal initially. Both parties can exert costly effort to conclusively prove the surplus' true size. The agent's liability…

We analyze a principal-agent procurement problem in which the principal (she) is unaware some of the marginal cost types of the agent (he). Communication arises naturally as some types of the agent may have an incentive to raise the…

Interconnected agents such as firms in a supply chain make simultaneous preparatory investments to increase chances of honouring their respective bilateral agreements. Failures cascade: if one fails their agreement, then so do all who…

A small investor provides liquidity at the best bid and ask prices of a limit order market. For small spreads and frequent orders of other market participants, we explicitly determine the investor's optimal policy and welfare. In doing so,…

A principal funds a multistage project and retains the right to cut the funding if it stagnates at some point. An agent wants to convince the principal to fund the project as long as possible, and can design the flow of information about…

A principal must decide between two options. Which one she prefers depends on the private information of two agents. One agent always prefers the first option; the other always prefers the second. Transfers are infeasible. One application…

The optimal price of each firm falls in the search cost of consumers, in the limit to the monopoly price, despite the exit of lower-value consumers in response to costlier search. Exit means that fewer inframarginal consumers remain. The…

The problem of computing near-optimal contracts in combinatorial settings has recently attracted significant interest in the computer science community. Previous work has provided a rich body of structural and algorithmic insights into this…

In many settings, multiple uninformed agents bargain simultaneously with a single informed agent in each of multiple periods. For example, workers and firms negotiate each year over salaries, and the firm has private information about the…

A negative basis trade enters a long bond position and buys protection on the issuer of the bond through credit default swap (CDS), aiming at arbitrage profit due to the bond-CDS basis. To classic reduced form model theorists, the existence…

This paper aims to extend downside protection to a hedge fund investment portfolio based on shared loss fee structures that have become increasing popular in the market. In particular, we consider a second tranche and suggest the purchase…

I show that firms price almost competitively and consumers can infer product quality from prices in markets where firms differ in quality and production cost, and learning prices is costly. Bankruptcy risk or regulation links higher quality…

We consider the problem of determining a sequence of payments among a set of entities that clear (if possible) the liabilities among them. We formulate this as an optimal control problem, which is convex when the objective function is, and…

Receivable financing is the process whereby cash is advanced to firms against receivables their customers have yet to pay: a receivable can be sold to a funder, which immediately gives the firm cash in return for a small percentage of the…

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…

We study financial systems from a game-theoretic standpoint. A financial system is represented by a network, where nodes correspond to firms, and directed labeled edges correspond to debt contracts between them. The existence of cycles in…

The traditional framework for feature selection treats all features as costing the same amount. However, in reality, a scientist often has considerable discretion regarding which variables to measure, and the decision involves a tradeoff…

Unlike consumer goods industry, a high-tech manufacturer (OEM) often amortizes new product development costs over multiple generations, where demand for each generation is based on advance orders and additional uncertain demand. Also, due…