We examine equilibria in competitive insurance markets with adverse selection when wealth differences arise endogenously from unobservable savings or labor supply decisions. The endogeneity of wealth implies that high risk individuals may ceteris paribus exhibit the lower marginal willingness to...

We show that when a seller of a di¤erentiated good o¤ers the product allowing consumers an option to pay what they like, then all consumers will never free ride in equilibrium when their valuations of the good are positive, and, under certain conditions, all will consumers would pay. Further,...

We develop a framework for optimal taxation when agents can earn their income both in traditional activities, where private and social products coincide, and in rent-seeking activities, where private returns exceed social returns either because they involve the capture of pre-existing rents or...

We study a tractable two-dimensional model of price discrimination. Consumers combine a rigid with a more flexible choice, such as choosing the location of a house and its quality or size. We show that the optimal pricing scheme involves no bundling if consumer types are affiliated. Conversely,...

We study a model of managerial incentive problems where a manager chooses the first two moments of his firm's profit distribution - mean and volatility - along an efficient frontier. Assuming that managers differ with respect to their marginal cost of effort and their risk aversion we explore...

In this paper I consider the role of education poli-cies in redistribution of income when individuals differ in two aspects: ability and inherited wealth. I discuss the extent to which the rules that emerge in unidimensional settings apply also in the bidimen-sional setting considered in this...

In this paper I consider the role of optimal education policies in redistribution when individuals differ in two aspects: ability and inherited wealth. I discuss the extent to which the rules that emerge in unidimensional settings apply also in the bidimensional setting considered in this paper....

Jackson and Sonnenschein (2006) show that by linking collective decisions the incentive costs can become negligible and, at the limit, ex-ante efficiency can be achieved. In a voting situation this implies that the agents` intensity of preferences can be taken into account even in the absence of...

This paper studies endogenous entry and ex ante revenue-maximizing auctions in an independent private value setting where potential bidders have private-information entry costs. The contribution of this paper is four-fold. First, we show that any equilibrium entry can be characterized through a...

In many countries, taxes on businesses are less progressive than labor income taxes. This paper provides a justification for this pattern based on adverse selection that entrepreneurs face in credit markets. Individuals choose between becoming entrepreneurs or workers and differ in their skill...