Banks face a dual mandate of raising low-cost deposits while avoiding liquidity risk. We
propose a novel mechanism whereby banks use portfolio opacity to meet this objective.
Specifically, banks choose opaque portfolios to secure cheap long-term funding while
trading off insolvency and illiquidity....

Banks face a dual mandate of raising cheap deposits while avoiding liquidity risk. We propose a novel mechanism whereby banks use portfolio opacity to meet this objective. Specifically, banks choose opaque portfolios to secure cheap long-term funding while trading off...

While large language models (LLMs) perform well on well-defined tasks, effective
prompts are challenging when tasks depend on users’ soft traits and latent prefer-
ences. We formalize this friction by introducing preference uncertainty—capturing
soft information—into a cheap talk framework (Crawford and Sobel, 1982)...

Firms are increasingly adopting predictive artificial intelligence (AI) to improve decision-making by combining advanced data analysis with managerial judgment. While AI provides more precise information to support managerial decision-making, its adoption can nevertheless reduce shareholder profits and the aggregate welfare,...

When workers are compensated partly in unvested equity, they may leave the firm if they observe low managerial effort, reducing the firm’s value and the manager’s compensation. We call this the worker monitoring channel. Through this channel, unvested worker equity...

We develop a dynamic household finance model showing that student loans --  non-dischargeable in the U.S. bankruptcy -- alleviate the well-documented debt overhang in labor supply decisions. Non-dischargeability mutes opportunities for households to strategically reduce labor supply at the expense...