Working Papers

These papers are working drafts of research which often appear in final form in academic journals. The published versions may differ from the working versions provided here.

Dana Foarta, Massimo Morelli
August 2020

Decision makers called to evaluate and approve a reform, proposed by an interest group, a politician, or a bureaucracy, suffer from a double asymmetric information problem: about the competence of the proposer and the consequences...

Antje Berndt, Darrell Duffie, Yichao Zhu
July 23, 2020

This note presents a preliminary approach to the design of an across-the-curve credit spread index (AXI). The index is a measure of the recent average cost of wholesale unsecured debt funding for publicly listed...

Austin van Loon, Amir Goldberg, Sameer B. Srivastava
July 2020

What leads people to feel negatively about members of other social groups? While recent work has mostly focused on the strength of group identity, we propose that perceptions of intergroup difference, and the animus they...

Zhengyang Jiang, Hanno Lustig, Stijn Van Nieuwerburgh, Mindy Z. Xiaolan
July 2020

When debt is priced fairly, governments face a trade-off between insuring bondholders and taxpayers. If the government decides to fully insure bondholders by manufacturing risk-free debt, then it cannot insure taxpayers against permanent macro-economic shocks...

Vladimir Asriyan, Dana Foarta, Victoria Vanasco
July 2020

We study the joint determination of product quality and complexity in a rational setting. We introduce a novel notion of complexity, which affects how costly it is for an agent to acquire information about product...

Dirk Bergemann, Francisco Castro, Gabriel Weintraub
June 30, 2020

We compare the revenue of the optimal third-degree price discrimination policy against a uniform pricing policy. A uniform pricing policy offers the same price to all segments of the market. Our main result establishes that...

Darrell Duffie, Samuel Antill
June 16, 2020

We explain how the common practice of size-discovery trade detracts from overall financial market efficiency. At each of a series of size-discovery sessions, traders report their desired trades, generating allocations of the asset and cash...

Ramesh Johari, Hannah Li, Gabriel Weintraub
June 16, 2020

We develop an analytical framework to study experimental design in two-sided platforms. In the settings we consider, customers rent listings; rented listings are occupied for some amount of time, then become available. Platforms typically use...

Bar Light, Gabriel Weintraub
June 4, 2020

The standard solution concept for stochastic games is Markov perfect equilibrium (MPE); however, its computation becomes intractable as the number of players increases. Instead, we consider mean field equilibrium (MFE) that has been popularized in...

Arvind Krishnamurthy, Markus Brunnermeier
June 2020
Arvind Krishnamurthy, Wenhao Li
June 2020

We develop a model of financial crises with both a financial amplification mechanism, via frictional intermediation, and a role for sentiment, via time-varying beliefs about an illiquidity state. We confront the model with data on...

Zhengyang Jiang, Arvind Krishnamurthy, Hanno Lustig
June 2020

We develop a theory that links the U.S. dollar’s valuation in FX markets to foreign investors’ demand for U.S. safe assets. When the convenience yield that foreign investors derive from holding U.S. safe assets increases,...

Kostas Bimpikis, Yiangos Papanastasiou, Wenchang Zhang
June 2020

While information design has gained significant attention in the recent literature as a tool for shaping consumers’ purchase behavior, little is known about its use and implications in two-sided marketplaces, where both supply and demand...

Eduardo Davila, Benjamin Hébert
June 2020

This paper studies the optimal design of corporate taxes when firms are financially constrained. We identify a corporate taxation principle: taxes should be levied on unconstrained firms,

Mohammad Akbarpour, Cody Cook, Aude Marzuoli, Simon Mongey, Abhishek Nagaraj, Matteo Saccarola, Pietro Tebaldi, Shoshana Vasserman, Hanbin Yang
June 2020

We develop a heterogeneous-agents network-based model to analyze alternative policies during a pandemic outbreak, accounting for health and economic trade-offs within the same empirical framework. We leverage a variety of data sources, including data on...

Rebecca Diamond, Adam Guren, Rose Tan
June 2020

How costly is foreclosure? Estimates of the social cost of foreclosure typically focus on financial costs. Using random judge assignment instrumental variable (IV) and propensity score matching (PSM) approaches in Cook County, Illinois, we find...

Paul Vicinanza, Amir Goldberg, Sameer B. Srivastava
May 26, 2020

Which groups are most likely to become visionaries that define the future of their field? Because vision is difficult to measure, prior work has reached conflicting conclusions: one perspective emphasizes the benefits of being large,...

Darrell Duffie
May 18, 2020

I explain the meaning of an interoperable payment system and why interoperability is crucial for efficiency. I review some alternative approaches to interoperability, including central bank digital currencies (CBDCs), hybrid CBDCs, and two-ledger upgrades of...

Stephen Comello, Gunther Glenk, Stefan J. Reichelstein
May 2020

The rapid deployment of electric vehicles is widely viewed as a promising path towards decarbonizing the transportation sector. The pace at which electric vehicles will replace those with internal combustion engines will depend to a large...