This paper analyzes the possibility and the consequences of rational bubbles in a dy- namic economy where financially constrained firms demand and supply liquidity. Bub- bles are more likely to emerge, the scarcer the supply of outside liquidity and the more limited the pledgeability of...

The recent unravelling of the Eurozone's financial integration raised concerns about feedback loops between sovereign and banking insolvency. This paper provides a theory of the feedback loop that allows for both domestic bailouts of the banking system and sovereign debt forgiveness by...

We analyze platforms in two-sided markets with network externalities, using the specific context of a payment card association. We study the cooperative determination of the interchange fee by member banks. The interchange fee is the "access charge" paid by the merchants' banks (the acquirers)...

We examine the performance attributes of a merchant transmission investment framework that relies on 'market driven' investment to increase transmission network capacity needed to support competitive wholesale markets for electricity. Under a stringent set of assumptions, the merchant investment...