We study the profit-maximizing price path of a monopolist selling a durable good to buyers who arrive over time and whose values for the good evolve stochastically. The setting is completely stationary with an infinite horizon. Contrary to the case with constant values, optimal prices fluctuate with time. We argue that consumers’ randomly changing values offer an explanation for temporary price reductions that are often observed in practice. (JEL D82)

When can financial advisor conflicts of interest generate worse outcomes for clients? A regulation following from Dodd-Frank prohibits municipal advisors from simultaneously acting as bond underwriters. Using a difference-in-differences approach and 20,051 bond auctions, I test whether limited advisor privileges affect financial advice and borrower outcomes. Financing costs of bonds with potential dual advisor-underwriters fall by 11.4 basis points after the advisor is no longer allowed to underwrite. The decline follows from increases in standardization, third-party certification, and auction participation, all of which are consistent with limiting the adverse selection that arises from advisors withholding information from the market. (JEL D44, D53, G12, G14, G28, H74)

We study the interplay between informational frictions and second-degree price discrimination. Our theory recognizes that consumers differ in their tastes for quality as well as in the information they possess about available offers, which leads to dispersion over price–quality menus in equilibrium. While firms are ex ante identical, we show that their menus are ordered so that more generous menus leave more surplus to consumers of all valuations. We explore the cross-section of equilibrium menus and variations in market conditions to generate empirical predictions on prices, qualities, and markups across firms, and within a firm’s product line. For instance, more competition may raise prices for low-quality goods; yet, consumers are better off, as the qualities they receive also increase. The predictions of our model illuminate empirical findings in many markets, such as those for cell phone plans, yellow-pages advertising, cable TV, and air travel.

We develop a dynamic theory of managerial turnover in a world in which the quality of the match between a firm and its managers changes stochastically over time. Shocks to managerial productivity are anticipated at the time of contracting but privately observed by the managers. Our key positive result shows that the firm’s optimal retention decisions become more permissive with time. Our key normative result shows that, compared to what is efficient, the firm’s contract induces either excessive retention at all tenure levels or excessive firing at the early stages of the relationship, followed by excessive retention after sufficiently long tenure.

We study the interaction between tax advantages for municipal bonds and the market structure of auctions for these bonds. We show that this interaction can limit a bidder’s ability to extract information rents and is a crucial determinant of state and local governments’ borrowing costs. Reduced-form estimates show that increasing the tax advantage by 3 pp lowers mean borrowing costs by 9–10%. We estimate a structural auction model to measure markups and to illustrate and quantify how the interaction between tax policy and bidder strategic behaviour determines the impact of tax advantages on municipal borrowing costs. We use the estimated model to evaluate the efficiency of Obama and Trump administration policies that limit the tax advantage for municipal bonds. Because reductions in the tax advantage inflate bidder markups and depress competition, the resulting increase in municipal borrowing costs more than offsets the tax savings to the government. Finally, we use the model to analyse a recent non-tax regulation that affects entry into municipal bond auctions.