We study how diversity evolves at a firm with entry-level and upper-level employees who vary in ability and "type" (gender or ethnicity). The ability of entry-level employees is increased by mentoring. An employ receives more mentoring when more upper-level employees have the same type. Optimal...

The authors study the relationship between asset prices and herd behavior, which occurs when traders follow the trend in past trades. When traders have private information on only a single dimension of uncertainty (the effect of a shock to the asset value), price adjustments prevent herd...