Competition and Privacy in Off-Market Trading (w/ Markus Baldauf and Josh Mollner)

In U.S. equity markets, brokers route retail orders to wholesalers who execute them offexchange at prices beating the NBBO. We propose a new theory for why wholesalers offer these discounts: by executing retail flow, a wholesaler privately learns, implying information rents from subsequent on-exchange market making. These rents motivate improved retail pricing, potentially generating midpoint-or-better executions, a commonly observed pattern that classic adverse-selection or inventory models struggle to explain. Policy implications include: (1) enhanced trade reporting erodes information rents and can worsen retail prices; (2) order-by-order auctions, despite increasing competition, may also worsen prices by eroding information rents; (3) a request-for-stream mechanism increases competition while preserving information rents, improving retail pricing.

Liquid Staking and the Limits of Policy (w/ Faycal Drissi and Zachary Feinstein)

We study the role of liquid staking and how it affects the interaction between issuance policy, economic productivity, and security in proof-of-stake blockchains. In a dynamic macro-finance framework, we show that issuance redistributes resources from productive on-chain activity to validators, which effectively acts as a tax on productive capital. This mechanism generates a Laffer-curve-type tradeoff: beyond an interior optimum, higher issuance weakens the productive base that finances security and reduces staking rewards. We then introduce liquid staking, which allows users to earn staking rewards while retaining liquidity for productive use. Liquid staking collapses the traditional tradeoff between staking and DeFi. When liquid staking tokens (LSTs) closely substitute for the native asset and benefit from strategic complementarities, issuance reallocates productive activity toward LSTs, compresses the feasible policy space, and can render issuance and slashing ineffective as policy instruments.

Performance Incentives with Multiple Instruments (w/ Erik Madsen and Andy Skrzypacz)

We systematically study the tradeoff between monetary and non-monetary incentives as instruments to overcome moral hazard. Monetary incentives are provisioned through surplus-neutral payments but are restricted by limited liability.  By contrast, non-monetary incentives impact total surplus by distorting the allotment of perks and workplace amenities, promotions, termination, project growth, or other promises about the future.  An optimal incentive scheme punishes failure with reduced non-monetary allocations, while rewarding success with increased non-monetary allocations and possibly an accompanying monetary payment.  As desired effort increases, optimal non-monetary incentives strengthen while monetary payments often respond in a non-monotone fashion.

Reward Schemes for Autonomous Workers (w/ Erik Madsen and Andy Skrzypacz)

When workers enjoy autonomy over aspects of their work, their employers commonly use both monetary bonuses and tangible non-monetary prizes to guide their choices. We study the design of these reward schemes, which optimally utilize a mix of the two tools and balance the (linear) financial cost of bonuses against the (convex) allocative cost of prize incentives. As the employer's need to reshape employee choices grows, prize incentives increase while monetary incentives typically respond non-monotonically. We establish these results in a model flexible enough to encompass loyalty programs on Uber and Airbnb as well as return-to-office incentives for hybrid workers.

Incentive Design for Talent Discovery (w/ Erik Madsen and Andy Skrzypacz)

We study how talent discovery within organizations distorts employee task choices. These choices are generally suboptimal when employees seek to earn promotions which are awarded based on perceived talent. They can be improved through incentive schemes which pay bonuses and/or reallocate promotions between employees. We show that the optimal incentive tool depends on the desired power of incentives, with low-powered incentives provisioned through bonuses and high-powered incentives achieved by reallocating promotions. Organizations can sometimes further benefit by dividing employees into groups with different promotion rates and bonuses, which we show eliminates the need to promote inefficiently within groups.

Stress Tests and Bank Portfolio Choice

How informative should bank stress tests be? I use Bayesian persuasion to formalize stress tests and show that regulators can reduce the likelihood of a bank run by performing tests which are only partially informative. Fully disclosing stress tests are never strictly optimal, and I find conditions under which full disclosure is worse than no disclosure. Optimal stress tests give just enough failing grades to keep passing grades credible enough to avoid runs. I find that optimal stress tests, by reducing the probability of runs, reduce the optimal level of banks' liquidity cushions. I also examine the impact of anticipated stress tests on banks' ex ante incentive to invest in risky versus safe assets.