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We present an approach to network formation based on the notion that social networks are formed by individual decisions that trade off the costs of forming and maintaining links against the potential rewards from doing so. We suppose that a link with another agent allows access, in part and in due course, to the benefits available to the latter via his own(More)
We consider the provision of venture capital in a dynamic agency model. The value of the venture project is initially uncertain and more information arrives by developing the project. The allocation of the funds and the learning process are subject to moral hazard. The optimal contract is a time-varying share contract which provides intertemporal(More)
We develop a method for decomposing countries’ observed export prices into quality versus quality-adjusted components using information contained in their trade balances. Holding observed export prices constant, countries with trade surpluses are inferred to offer higher quality than countries running trade deficits. Our method accounts for variation in(More)
We study the infinite-horizon pricing problem of a seller facing a buyer with single-unit demand, whose private valuation changes over time. This evolution is modeled as a stochastic shock to the buyer’s valuation arriving at a random time that is unanticipated by both the buyer and the seller. The arrival of the shock is unobserved by the seller. We show(More)
The random priority (random serial dictatorship) mechanism is a common method for assigning objects to individuals. The mechanism is easy to implement and strategy-proof. However this mechanism is inefficient, as the agents may be made all better off by another mechanism that increases their chances of obtaining more preferred objects. Such an inefficiency(More)
Suppose agents value information not only to make contingent plans but also intrinsically. How are such attitudes toward information related to attitudes toward risk? We generalize the Kreps Porteus recursive expected utility model, dropping both recursivity and expected utility. There is a geometric analogy between risk and information. We characterize(More)
In an Arrow-Debreu exchange economy with identical agents except for their initial endowment , we examine how wealth inequality affects the equilibrium level of the equity premium and the risk-free rate. We first show that wealth inequality raises the equity premium if and only if the inverse of absolute risk aversion is concave in wealth. We then show that(More)
In the typical analysis of an exchange economy, agents are involved in consumption and exchange goods voluntarily when mutually beneficial. The endowments and the preferences are the primitives of the model. The distribution of consumption in society is determined endogenously through trade. This article is motivated by a complementary perspective on human(More)
We axiomatize, in an Anscombe-Aumann framework, the class of preferences that admit a representation of the form V (f) = (d), where is the mean utility of the act f with respect to a given probability, d is the vector of state-by-state utility deviations from the mean, and (d) is a measure of (aversion to) dispersion that corresponds to an uncertainty(More)