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Optimal Delegation, Unawareness, and Financial Intermediation

Author

Listed:
  • Nicola Pavoni

    (Bocconi University, IGIER)

  • Sarah Auster

    (Bocconi Univesrity)

Abstract

We study the delegation problem between an investor and a financial intermediary, who is not only privately informed about the state of the world but also has superior awareness of the available investment opportunities. Under some regularity conditions on the state distribution, we show that the intermediary has incentives to make the investor aware of investment opportunities at the extremes, e.g. very risky and very safe projects, while leaving the investor unaware of intermediate investment options.

Suggested Citation

  • Nicola Pavoni & Sarah Auster, 2016. "Optimal Delegation, Unawareness, and Financial Intermediation," 2016 Meeting Papers 1106, Society for Economic Dynamics.
    • Handle: RePEc:red:sed016:1106
    as

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    References listed on IDEAS

    as
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