Due to their ties with elected leaders, central bankers may pursue policies that are not in society's best interests. Consequently, the relationship between the public and the central bank can be characterized as a principal-agent problem. An inflation and a stabilization bias arise as a result...

We study the role of whistleblowing in the following inspection game. Two agents who compete for a prize can either behave legally or illegally. After the competition, a controller investigates the agents' behavior. This inspection game has a unique (Bayesian) equilibrium in mixed strategies. We...

Do financial market participants free-ride on liquidity? To address this question, we construct a dynamic general equilibrium model where agents face idiosyncratic preference and technology shocks. A secondary financial market allows agents to adjust their portfolio of liquid and illiquid assets...