We use a two-period matching model with initial uncertainty about productivities of participants to analyze incentives for early contracting or unraveling. Unraveling provides insurance in the absence of complete markets, but causes inefficient assignments. Unraveling is more likely the smaller the applicant pool, the smaller the proportion of more-promising applicants, and the greater the heterogeneity in the pool. Banning early contracts hurts firms and benefits lesspromising applicants; the effects on more-promising applicants depend on how the gains from early contracts are shared. Ex post buyouts eliminate inefficient assignments, and more-promising applicants always unravel.

A free-rider problem arises when a group choice between two alternatives has to be made on the basis of privately collected evidence, leading to insufficient effort in gathering evidence and an ex ante welfare loss for the group. To alleviate the free-rider problem, the group can commit to a "conservative" rule, whereby the decision is made against the alternative favored by the group's preference or prior when evidence supports it but is not preponderant. Optimal conservatism increases private incentives to gather evidence and improves the quality of the group decision. My result explains why sometimes groups appear overly cautious toward favored alternatives.

Using a difference-in-differences approach that relies on the exogenous increase in options trading activity generated by the Securities and Exchange Commission's Penny Pilot Program, we find a negative causal effect of options trading on earnings management. With a reduced magnitude of discretionary accruals, the pilot firms are less likely to marginally beat earnings targets and less likely to have financial misstatements during the pilot period. Cross-sectional analysis shows that the effects are more pronounced among firms with a small or less independent board or a small audit committee. Furthermore, the pilot firms receive more market attention, and their stock price efficiency improves more than the nonpilot firms during the pilot period. The evidence is consistent with the argument that active options trading enhances market scrutiny of firms' reporting behavior, improving financial reporting quality and price efficiency.

A seller designs a mechanism to sell a single object to a potential buyer whose private type is his incomplete information about his valuation. The seller can disclose additional information to the buyer about his valuation without observing its realization. In both discrete-type and continuous-type settings, we show that discriminatory disclosure—releasing different amounts of additional information to different buyer types—dominates full disclosure in terms of seller revenue. An implication is that the orthogonal decomposition technique, while an important tool in dynamic mechanism design, is generally invalid when information disclosure is part of the design.

The authors use a two-period matching model with initial uncertainty about productivities of participants to analyze incentives for early contracting or unraveling. Unraveling provides insurance in the absence of complete markets but causes inefficient assignments. Unraveling is more likely the smaller the applicant pool, the smaller the proportion of more-promising applicants, and the greater the heterogeneity in the pool. Banning early contracts hurts firms and benefits less-promising applicants; the effects on more-promising applicants depend on how the gains from early contracts are shared. Ex post buyouts eliminate inefficient assignments and more-promising applicants always unravel.

We present a model of delegation with self-interested and privately informed experts. A team of experts with extreme but opposite biases is acceptable to a wide range of decision makers with diverse preferences, but the value of expertise from such a team is low. A decision maker wants to appoint experts who are less partisan than he is in order to facilitate information pooling by the expert team. Selective delegation, either by controlling the decision-making process or by conditioning the delegation decision on his own information, is an effective way for the decision maker to safeguard own interests while making use of expert information.

In an assignment market with uncertainty regarding productive ability of participants, early contracting can occur as participants balance risk sharing and sorting efficiency. More promising agents may contract early with each other because insurance gains outweigh sorting inefficiency, whereas less promising agents wait. It can also happen in equilibrium that more promising job applicants contract early with less promising firms. Such worker‐driven equilibria may arise when applicants are more risk‐averse, have greater uncertainty regarding their quality, or face a tighter market and when production exhibits increasing returns to firms’ qualities. Early contracting then unambiguously hurts the more promising firms that choose to wait.

Committees improve decisions by pooling members' independent information, but promote manipulation, obfuscation, and exaggeration of private information when members have conflicting preferences. Committee decision procedures transform continuous data into ordered ranks through voting. This coarsens the transmission of information, but controls strategic manipulations and allows some degree of information sharing. Each member becomes more cautious in casting the crucial vote than when he alone makes the decision based on own information. Increased quality of one member's information results in his casting the crucial vote more often. Committees make better decisions for members than does delegation.

This study examines how different components of executive compensation affect the cost of debt. We find that debt-like and equity-like pay components have differing effects: an increase in defined benefit pensions is associated with lower bond yield spread, while higher share holdings lead to higher spreads. In addition, we find that stock options have a mixed impact on the cost of debt whereas cash bonus has no significant impact. Overall, our results indicate that corporate bondholders are fully aware of both risk-taking and risk-avoiding incentives created by various executive pay components.