We extend the concept of competitive search equilibrium to environments with private information, and in particular adverse selection. Principals (e.g. employers or agents who want to buy assets) post contracts, which we model as revelation mechanisms. Agents (e.g. workers, or asset holders)...

The paper studies asset pricing in informationally decentralized markets. These markets have two key frictions: trading is decentralized (bilateral), and some agents have private information. We analyze how uninformed agents acquire information over time from their bilateral trades. In...

A central result in the economic theory of liability is that, if an injurer's liability equals the victim's loss, then either the rule of strict liability or the rule of negligence can induce the injurer to behave properly. However, for this result to hold, the injurer must know the victim's...

The optimal weights on indicators in models with partial information about the state of the economy and forward-looking variables are derived and interpreted, both for equilibria under discretion and under commitment. The private sector is assumed to have information about the state of the...

Optimal wage indexation, as derived by Gray, was subject to criticism due to a lack of efficient use of information; failure to clear the market which resulted in non-optimal contracts; and the lack of an explicit use of welfare criteria. The purpose of this paper is to derive a wage contract...

This paper reconsiders the Phelps-Lucas hypothesis, according to which temporary real effects of purely nominal disturbances result from imperfect information, but departs from the assumptions of Lucas (1973) in two crucial respects. Due to monopolistically competitive pricing, higher-order...

This paper develops a model to analyze information aggregation in commodity markets. Through centralized trading, commodity prices aggregate dispersed information about the strength of the global economy among goods producers whose production has complementarity, and serve as price signals to...

Shimer (2005) pointed out that although we have a satisfactory theory of why some workers are unemployed at any given time, we don?t know why the number of unemployed workers varies so much over time. The basic Mortensen-Pissarides (1994) model does not generate nearly enough volatility in...

Both conventional wisdom and leading academic research view pork barrel spending as antithetical to responsible policymaking in times of crisis. In this paper we present an alternative view. When agents are heterogeneous in their ideology and in their information about the economic situation,...

People's fairness preferences are an important constraint for what constitutes an acceptable economic transaction, yet little is known about how these preferences are formed. In this paper, we provide clean evidence that previous transactions play an important role in shaping perceptions of...