We study banks' incentive to pool assets of heterogeneous quality when investors evaluate pools by extrapolating from limited sampling. Pooling assets of heterogeneous quality induces dispersion in investors' valuations without affecting their average. Prices are determined by market clearing...

We model a financial market in which companies engage in strategic financial reporting knowing that investors only pay attention to a randomly drawn sample from firms' reports and extrapolate from this sample. We investigate the extent to which stock prices differ from the fundamental values,...

This paper shows that utility differences between the self-employed and employees increase with financial development. This effect is explained not by increased profits but by an increased value of nonmonetary benefits, in particular job independence. We interpret these findings by building a...

Procurement awarding mechanisms based on average price have been advocated to soften price competition and reduce cost overruns. We show that their theoretical support is shaky. When the bid closest to the average is awarded, firms submit identical bids, making the selection extremely costly and...