We study the problem of a risk-neutral decision-maker who has to choose among two alternative investment projects of different scales under output price uncertainty. We provide parameter restrictions under which the optimal investment strategy is not a trigger strategy and the optimal investment...

We conduct a series of experiments that simulate trading in financial markets and which allows us to identify the different effects that subjects’ risk attitudes and belief updating rules have on the information content of the order flow. We find that there are very few risk-neutral subjects...

In this paper, the authors conduct a series of experiments that simulate trading in financial markets and which allows them to identify the different effects that subjects’ risk attitudes and belief updating rules have on the information content of the order flow. They find that there are very...

We propose a model of equilibrium contracting between two agents who are “boundedly rational” in the sense that they face time costs of deliberating current and future transactions. We show that equilibrium contracts may be incomplete and assign control rights: they may leave some...

A prevalent feature in rating markets is the possibility for the client to hide the outcome of the rating process, after learning that outcome. This paper identifies the optimal contracting arrangement and the circumstances under which simple ownership contracts over ratings implement this...