Article

Liquid Bundles

Emmanuel Farhi et Jean Tirole

Résumé

Parties in financial markets, industries, compensation design or politics may negotiate on either a piecemeal or a bundled basis. Little is known about the desirability of bundling when values are common and/or information endogenous. The paper shows that bundling encourages information-equalizing investments, thereby facilitating trade. It accordingly revisits and qualifies existing knowledge on security design.

Mots-clés

Liquidity; security design; tranching; information acquisition;

Codes JEL

  • D82: Asymmetric and Private Information • Mechanism Design
  • E51: Money Supply • Credit • Money Multipliers
  • G12: Asset Pricing • Trading Volume • Bond Interest Rates
  • G14: Information and Market Efficiency • Event Studies • Insider Trading

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Publié dans

Journal of Economic Theory, vol. 158, juillet 2015, p. 634–655