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...

We develop a model in which the capital of the intermediary sector plays a critical role in determining asset prices. The model is cast within a dynamic general equilibrium economy, and the role for intermediation is derived endogenously based on optimal contracting considerations. Low...

We study optimal enforcement in credit markets in which the only threat facing a defaulting borrower is restricted access to financial markets. We solve for the optimal level of exclusion, and link it to observed institutional arrangements. Regulation in this environment must accomplish two...

We study optimal enforcement in credit markets in which the only threat facing a defaulting borrower is restricted access to financial markets. We solve for the optimal level of exclusion, and link it to observed institutional arrangements. Regulation in this environment must accomplish two...

Are stock prices determined by fundamentals or can 'bubbles'exist? An important issue in this debate concerns the circumstances in which deviations from fundamentals are consistent with rational behavior. When there is asymmetric information between investors and portfolio managers, portfolio...