We study how securities and trading mechanisms can be designed to optimally mitigate the adverse impact of market imperfections on liquidity. Asset owners seek to obtain liquidity by selling their claims on future cash-flows, on which they have private information. Our analysis encompasses both...

We study the decision of when to invest in an indivisible project whose value is perfectly observable but driven by a parameter that is unknown to the decision maker ex ante. This problem is equivalent to an optimal stopping problem for a bivariate Markov process. Using filtering and martingale...

Equilibrium of the housing market depends on a complex set of interactions between: (1) individual location decisions; (2) individual housing investment; (3) collective decisions on urban growth. We embed these three elements in a model of a dynamic economy with two sources of friction:...

We develop a model of hierarchies based on the allocation of authority. A firm's owners have ultimate authority over a firm's decisions, but they have limited time or capacity to exercise this authority. Hence owners must delegate authority to subordinates. However, these subordinates also have...

We view a contract as a list of outcomes. Ex ante, the parties commit not to consider outcomes not on the list, i.e., these are quot;ruled outquot;. Ex post, they freely bargain over outcomes on the list, i.e., the contract specifies no mechanism to structure their choice; in this sense outcomes...

Interactions between economic development and financial development are studied by looking at the roles of financial institutions in selecting Ramp;D projects (including for both imitation and innovation). Financial development is regarded as the evolution of the financing regimes. The...

The welfare economic method for analyzing the case for government intervention is often criticised for ignoring the political determination of policies. The standard method of accounting for this critique studies the case for intervention under the constraint that the level of the instrument in...

Public provision of private goods such as education is usually viewed as a form of redistribution in kind. However, does it arise when income redistribution is feasible as well? In this paper I analyse a two-dimensional model of political decision making. Society has to choose both the tax rate...

We show that allocation of ownership matters even in a long-term relationship where problems of opportunism are less severe unless agents are very patient. Ownership structure is chosen to give the agents best incentives to cooperate. The optimal control structure of the static game restricts...

This paper analyses optimal irreversible investment policy when profits are subject to a multiplicative geometric Brownian motion shock. The marginal product of capital is increasing initially and decreasing thereafter. In the latter range, optimal policy is familiar: capacity is added gradually...