@article{dc8a05fc14e0498abe59a5950d442b78,
title = "Liquid bundles",
abstract = "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.",
keywords = "Information acquisition, Liquidity, Security design, Tranching",
author = "Emmanuel Farhi and Jean Tirole",
note = "Funding Information: The authors thank two referees, the editors and participants in seminars in Lausanne and Mannheim and at the Jacob Marschak lecture (Lacea-Lames in Santiago de Chile), the ERC-SCOR conference on Risk Management and Financial Markets, the Koopmans lecture at Yale University, the Wharton Liquidity and Financial Crises conference, the Wisconsin Money and Finance conference, and the FRIC'13 Copenhagen conference on financial frictions for helpful comments, and the ERC programme grant FP7/2007-2013 No. 249429 , “Cognition and Decision-Making: Laws, Norms and Contracts” for financial support for this research. They are very grateful to Olivier Wang for excellent research assistance. The paper was previously titled “Information, Tranching and Liquidity”. Publisher Copyright: {\textcopyright} 2014 Elsevier Inc..",
year = "2015",
month = jul,
day = "1",
doi = "10.1016/j.jet.2014.09.002",
language = "English (US)",
volume = "158",
pages = "634--655",
journal = "Journal of Economic Theory",
issn = "0022-0531",
publisher = "Academic Press Inc.",
number = "PB",
}