This paper introduces a theory of market incompleteness based on the information transmission role of prices and its adverse impact on the provision of insurance in financial markets. We analyse a simple security design model in which the number and payoff of securities are endogenous. Agents...

This paper studies the problem of optimal security design by a privately informed entrepreneur. In the context of a simple parametric model, it is shown that the entrepreneur does not find it profitable to float an asset that affords her an informational advantage. The reason is that, with...

This paper concerns a decision problem of an agent, searching to find a low price, whose memory is represented by a partition of the set of possible past prices. The number of elements in the partition is limited. The author characterizes the optimal partition for the case of a single decision...