A screening instrument is costly if it is socially wasteful and productive otherwise. A principal screens an agent with multidimensional private information and quasilinear preferences that are additively separable across two components: a one-dimensional productive component and a multidimensional costly component. Can the principal improve upon simple one-dimensional mechanisms by also using the costly instruments? We show that if the agent has preferences between the two components that are positively correlated in a suitably defined sense, then simply screening the productive component is optimal. The result holds for general type and allocation spaces, and allows for nonlinear and interdependent valuations. We discuss applications to monopoly pricing, bundling, and labour market screening.

The 2023 banking turmoil highlighted how technological advancements have significantly accelerated the speed of bank runs. This paper investigates the impact of these faster bank runs on the effectiveness of policy interventions by interpreting them as a constraint on the relative speed of policy responses. Using a model of bank runs and ex-post policy responses, we examine how delays caused by this constraint affect financial fragility and welfare. We find that while delays exacerbate welfare loss by distorting allocations, they may also decrease fragility by making banks more cautious. We study the optimal level of structural delay, balancing the trade-off between distributional distortions and financial fragility. Furthermore, we extend this model to explore the roles of liquidity regulations and capital injections given such a delay. We show that regulation may be more desirable than a capital injection if the delay is substantial because the benefit of decreased fragility is particularly potent.

This article develops an integrated model of asset pricing and moral hazard. It is demonstrated that the expected dollar return of a stock is independent of managerial incentives and idiosyncratic risk, but the equilibrium price of the stock depends on them. Thus, the expected rate of return is affected by managerial incentives and idiosyncratic risk. It is shown, however, that managerial incentives and idiosyncratic risk affect the expected rate of return through their influence on systematic risk rather than serve as independent risk factors. It is also shown that the risk aversion of the principal in the model leads to less emphasis on relative performance evaluation than in a model with a risk-neutral principal.

This article studies the contracting problem between an individual investor and a professional portfolio manager in a continuous-time principal-agent framework. Optimal contracts are obtained in closed form. These contracts are of a symmetric form and suggest that a portfolio manager should receive a fixed fee, a fraction of the total assets under management, plus a bonus or a penalty depending upon the portfolio's excess return relative to a benchmark portfolio. The appropriate benchmark portfolio is an active index that contains risky assets where the number of shares invested in each asset can vary over time, rather than a passive index in which the number of shares invested in each asset remains constant over time.

Introduction JN spite of the voluminous studies that have been made on the theory of the consumption function, one important question remains unanswered. Does the Keynesian theorem of consumer behavior operate in any modern community as Keynes claimed it would? ' The first section of this paper will be devoted to testing the Keynesian hypotheses: (1) the level of current income is the main determinant of the level of current consumption in the short run, and (2) the marginal propensity to consume is less than unity. In the second section, we shall examine factors affecting the differences in aggregate consumption ratios of various nations. While much effort has been spent on study of the aggregate consumption function of the United States, our knowledge of the consumption patterns of countries in the rest of the free world, particularly of less advanced countries, continues to lag.2 The relative scarcity of research in this area has been due primarily to the absence of reliable data. Until the introduction of a uniform national account system by the United Nations in 1947, national income data were virtually non-existent except for the highly developed countries.3 As reports of the member nations have been published for a number of years, sufficient data are now available to calculate and compare the aggregate consumption functions of various nations. The following criteria were used in selecting countries for this study:

The rise of investments professionally managed with a socially responsible mandate has generated growing interest in environmental and social ratings. However, it is not clear how informative these ratings are or whether they are distorted by greenwashing. Based on the ratings of the leading provider, I offer the first evidence linking greenwashing to ratings inflation. Better ratings do not predict less future corporate bad behavior. This is of concern because it undermines the signaling value of these ratings. To understand these results, I develop a model where the rating agency may underinvest in greenwashing detection while firms have incentives to window dress and engage in greenwashing. Finally, controlling for greenwashing improves ratings predictive quality.

Since the beginning men have been engaged in producing things necessary for subsistence and have been confronted with the problem as to what things to produce and how to produce them. As soon as several persons combined their efforts in production, there has been the problem as to what each should do and how the product should be distributed among them. The order or condition under which men decide and carry on their activities with reference to production and distribution characterizes an economy. An economy is said to be free when the members of a community, each according to his ability and situation, freely make decisions and carry on economic activities. In a social economy production is undertaken mostly by separately organized business enterprises which constitute the cells of the entire economic organism of society. Individuals take part in these business enterprises in various specialized capacities. Production is no longer for the direct consumption of persons participating in each business enterprise, but for sale to consumers or to other business enterprises which in turn produce for final consumption.

In view of the purpose and nature of business operation, the conventional cost theory of value stands well the test of logic and should be maintained. The disparity between cost and revenue caused by changes in the value of money does not Affect the validity of cost but gives rise to the problem of conversion of cost figures to the current dollar level. The primary purpose of conversion of cost is, therefore, to bring cost into identical dollars with revenue so that real income in the sense of increase of economic well-being may be reflected and that figures of cost and revenue may continue to be relied upon as barometers of operating efficiency. This being so, revenue which sets the limit to income need not be converted as sometimes recommended, except for purpose of comparison between periods. The accounting effect of cost conversion is a segregation from income of what represents, in the case of rising price levels, but a recovery of current dollar cost necessary to maintain the integrity of economic capital. Conversion of all forms of "investment" assets such as buildings, machinery, equipment and inventories is desirable for a correct statement of value of resources in terms of current dollars and incidentally also, placing the costs of successive acquisitions of assets, especially fixed assets, to homogeneous dollar nines as basis for cost computation.

The article focuses on the valuation of intangibles in business practices for the purpose of purchase and sale. There have been a large number of variable factors that have to be taken into account in the process. However, there are several general considerations which are to a greater or less extent taken into account in all case of valuation of intangibles. In buying a business with an established earning power in excess of what is considered ordinary in the particular line of industry, the purchaser expects to pay for the capitalized value of the estimated excess earnings which may be judged to continue for a fairly definite number of years. In computing this value, a number of factors have to be considered, like, the earnings of the concern; the value of investment or which a normal rate of income is to be allowed; normal rate of earnings for the industry concerned; the amount of the excess earnings that can be transferred; the number of years during which the transferable excess earnings may be expected to accrue; and the rate for capitalizing the excess earnings thus determined.

This paper investigates a sequential social learning problem in which individuals face ambiguity about others’ signal structures and have max-min expected utility preferences, thereby exhibiting ambiguity aversion. Unlike previous findings, which suggest that learning outcomes depend on the specifics of the learning environment, this study establishes information cascades as a robust outcome under ambiguity. With sufficient ambiguity, cascades arise almost surely, regardless of the statistical properties of signal structures. Moreover, standard results predicting the absence of cascades can easily break down: Even minimal ambiguity can trigger cascades when signals are bounded and lead to incorrect herding when signals are unbounded.