We analyze a model where irrational and rational traders exchange a risky asset with competitive market makers. Irrational traders misperceive the mean of prior information (optimistic/pessimistic bias), the variance of prior information (better/lower than average effect)and the variance of the...

This paper, presents a game theoretic approach to the choice of the debt maturity by firms. The maturity of the debt can be viewed as a signal about the firm's quality sent to the financial sector. Two situations are investigated when the firm declares bankruptcy: the firm's assets may have zero...

This paper analyzes a multi-auction setting in which informed strategic agents are endowed with heterogeneous noisy signals about the liquidation value of a risky asset. One result is that when the variance of the noise is small the competition between traders takes the form of a rat race during...

The present work studies the behavior of a monopolistic informed trader in a two-period competitive dealer market. We show that the informed trader may engage in stock price manipulation as a result of the exploitation of his informational advantage (sufficient conditions are provided). The...

A gravity model, frequently used to explain trade patterns, is used to explain stock market correlations. The main result of the trade literature is that geography matters for goods markets. Physical location and trading costs should be less of an issue in asset markets. However we find that...

We analyze the result of allowing risk averse traders to split their orders among markets when market makers are assumed to be risk averse.We prove that linear symmetric equilibria exist in that setting. We find that market makers' aggregate expected utility of profit may increase with the...

This paper analyses procurement when contractors have limited liability and when the sponsor cannot commit to any specific form of future negotiation. It shows that introducing limited liability enhances competition and thus the likelihood of bankruptcy. Among efficient auctions in which only...

This paper analyses procurement from two, risk-averse, suppliers who are responsible for the timely delivery of some inputs. Their production is subject to inherent disruptions. We characterize the optimal contracts when suppliers can invest to lower the risk of delays that are costly to the...

This paper explores how an inventor should license an innovation that opens new markets for the licensees. Using a model incorporating product differentiation and network externalities we show that fixed fee licenses are optimal either when there is little competition downstream or when it is...