We design optimal mechanism to collect revenues from nonrenewable resource exploitation, when the resource must be explored and discovered and when there is asymmetric information. The exploration effort may result in a discovery that is revealed only to the firm, and the effort is not observed...

In 2001, Germany abolished public occupational disability insurance (ODI)-the second tier of its public DI system-for cohorts born after 1960. Using administrative data, we first document that, in the long run, overall DI inflows declined by roughly one-third. Second, using representative survey...

This paper studies a continuous-time regulatory problem in which a firm holds persistent private information about demand and is subject to a flow limited-liability constraint. The regulator regulates prices through a dynamic mechanism that ensures truthful reporting of the evolving type....

In 2001, Germany abolished public occupational disability insurance (ODI)-the second tier of its public DI system-for cohorts born after 1960. Using administrative data, we first document that, in the long run, overall DI inflows declined by roughly one-third. Second, using representative survey...

We propose a new policy instrument that leverages adverse selection when Pigouvian policies are infeasible or undesirable. Our policy gives firms the option to pay a tax on their voluntarily disclosed emissions, or an output tax based on the average emissions among undisclosed firms. We derive...

We show that adverse selection is a key determinant of banking market structure. Using data on US bank branches over 1981-2016, we study banks' decisions to expand or contract geographically. First, banks are more likely to expand in counties that are similar, in terms of industry shares, to...

We develop a framework for categorization in games, applicable both to multistage games of complete information and static games of incomplete information. Players use categories to form coarse beliefs about their opponents' behavior. Players best-respond given these beliefs, as in analogy-based...

For workers facing uncertain output, fixed-wage contracts provide implicit insurance compared to self-employment or performance-based pay. But like any insurance product, these contracts are prone to market distortions through moral hazard and adverse selection. Using a model of wage contracts...

In this paper, we address the identification and estimation of insurance models where insurees have private information about their risk and risk aversion. The model includes random damages and allows for several claims, while insurees choose from a finite number of coverages. We show that the...

Disasters caused by natural hazards, such as earthquakes or hurricanes, have many adverse consequences associated with the physical damage they cause. Here, we show that the very name given to a disaster can also lead to adverse consequences. We argue that the name used for a disaster is...

We study a situation where physicians differing in their degree of altruism exert a diagnostic effort before deciding whether to test patients to determine the most appropriate treatment. The diagnostic effort generates an imperfect private signal of the patient’s type, while the test is...

A common approach to markets with adverse selection is to regulate competition to minimize inefficiencies, while preserving consumer choice among firms. We study the role of procurement auctions - leading to sole provision by the winning firm - as an alternative market design. Relative to...

We develop a model to characterize optimal compensation when large risk-neutral firms and individual risk-averse consumers compete for heterogeneous workers. Production generates consumption utility over two periods, with an uncertain return in the second period. We analyze how screening motives...

We study the macroeconomic consequences of asymmetric information between firms and external investors. To do so, we develop a heterogeneous firm macro model in which firms have private information about their quality. Private information creates a lemons problem in the market for external...