Essays on Financial Markets with Endogenous Information Screening Choices

The first chapter studies screening competition under flexible information acquisition and its interaction with price competition. Multiple homogeneous buyers play a game where they simultaneously design independent exams with pre-specified information limit on a binary-type seller. Once observing own exam’s outcome, a buyer may choose to bid for the object. This paper shows that under general assumptions on information cost, binary-signal symmetric equilibrium exists and must be supported by mixed strategies. Moreover, equilibrium is inefficient and on average buyers over-reject the seller. Price regulation may help restore efficiency.The second chapter develops a dynamic general equilibrium model on the interaction of bankers’ asset and liability management with liquidity concerns. Bankers screen real production projects and issue deposits. Liquidity concerns stem from endogenized early withdrawals of deposits. To fulfill early withdrawals, bankers sell assets in a secondary market. The paper argues that ex post asymmetric information in the secondary market distorts bankers’ incentive in screening ex ante, as bad assets are easier to sell and generate liquidity benefits. Moreover, the general equilibrium feature of the model implies that exogenous aggregate productivity shocks are amplified and booms may lead to busts