Previous articleNext article No AccessIntermediation and Voluntary Exposure to Counterparty RiskMaryam FarboodiMaryam Farboodi Search for more articles by this author PDFPDF PLUS Add favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited Journal of Political Economy Just Accepted Article DOIhttps://doi.or...

We explain informed capital by showing that projects can be screened by comparing loan applicants. Because efficient comparing requires centralized monitoring, it represents a novel rationale for financial intermediation. Positive scale effects may make a single monopoly intermediary optimal. Comparing can also eliminate the problems of adverse selection and inefficient investments.

I develop a game-theoretic model to study information asymmetries in the evolving equity crowdfunding market. I assume (1) there are two types of investors: informed (“insiders”) and uninformed (“outsiders”); (2) the insiders invest first; and (3) the outsiders observe the aggregate of insiders’ actions and then decide whether to invest. Under these assumptions, I prove that there does not exis...

We study the optimal mechanism design problem faced by a market intermediary who makes revenue by connecting buyers and sellers. We first show that the optimal intermediation protocol has substantial structure: it is the solution to an algorithmic pricing problem in which seller’s costs are replaced with virtual costs, and the sellers’ payments need only depend on the buyer’s behavior and not t...