I develop a dynamic agency model of financial contracting, where borrowing constraints appear as part of the optimal contract. The novelty of the paper relative to previous work is that volatility is stochastic and exogenous to the agent behavior. A line of credit appears in the optimal long...

We study the optimal disclosure policy in security issuance using a Bayesian persuasion approach. An issuer designs a signal to persuade an investment bank to underwrite. The bank forms a posterior on the basis of the signal and makes its underwriting and retention decisions. When there is no...

This paper studies the optimal contract offered by a risk-neutral principal to a risk-averse agent when the agent’s hidden ability and action both improve the probability of the project being successful. We show that if the agent is sufficiently prudent and able, the principal induces a higher...

I consider a real business cycle model in which agents have private information about an idiosyncratic shock to their value of leisure. I consider the mechanism design problem for this economy and describe a computational method to solve it. This is an important contribution of the paper since...

I consider a neoclassical growth model with endogenous labor supply in which agents have private information about their idiosyncratic value of leisure. A key assumption is that these shocks follow a persistent stochastic process over time. For this economy I solve the economy-wide mechanism...

This work takes a closer look on the predominant assumption in usual lemon market models of having finitely many or even only two different levels of quality. We model a situation which is close to the classical monopolistic setting but admits an interval of possible quality values....

We develop a theoretical analysis of two widely used regulations of genetic tests, disclosure duty and consent law, and we run several experiments in order to shed light on both the take-up rate of genetic testing and on the comparison of policyholders' welfare under the two regulations....

A buyer makes an offer to a privately informed seller for a good of uncertain quality. Quality determines both the seller's valuation and the buyer's valuation, and the buyer evaluates each contract according to its worst-case performance over a set of probability distributions. This paper...

We study a competitive insurance market in which insurers have an imperfect informative advantage over policyholders. We show that the presence of insurers privately and heterogeneously informed about risk can explain the concentration levels, the persistent profitability and the pooling of risk...

Kenneth Arrow and Karl Borch published several important articles in the early 1960s that can be viewed as the beginning of modern economic analysis of insurance activity. This chapter reviews the main theoretical and empirical contributions in insurance economics since that time. The review...