We consider a regulator who does not know how many firms should be granted a license to enter a market as he has limited information on their setup costs. We propose two auction formats which implement the efficient market structure. In a "jumping English auction" the price for a license...

Drawing on recent advances in the study of reference dependent utility we model financial markets as a coordination game with multiple equilibria. Asset valuations may change endogenously through re-coordination which induces fluctuations in output. These fluctuations are shown to be...

When a young entrepreneurial firm matures, it is often necessary to replace the founding entrepreneur by a professional manager. This replacement decision can be affected by the private benefits of control enjoyed by the entrepreneur which gives rise to a conflict of interest between the...

We study an exchange economy in which investors are loss averse over relative consumption, that is, they suffer a utility loss if they consume less than members of their reference group. As a consequence there is an incentive to hold the same portfolio of risky assets as the reference group....