We study information disclosure in competitive markets with adverse selection. Sellers privately observe product quality, with higher quality entailing higher production costs, while buyers trade at the market-clearing price after observing a public signal. Because sellers’ participation in trade conveys information about quality, the designer faces endogenous constraints in the set of posteriors that she can induce. We reformulate the designer’s problem as a martingale optimal transport exercise, with an additional condition that rules out further information transmission through sellers' participation decisions, and characterize optimal signals. When the designer maximizes trade volume, the solution features negative-assortative matching of inefficient and efficient sellers. When the objective is a weighted combination of price and surplus, optimal signals preserve this structure as long as the weight on the price is high enough, otherwise they fully reveal low-quality types while pooling middle types with high-quality sellers.
This paper analyzes optimal insurance design when the insurer internalizes the effect of coverage on third-party service prices. A monopolistic insurer contracts with risk-averse agents who have sequential two-dimensional private information and preferences represented by Yaari’s dual utility. Insurance contracts shape service demand and, through a market-clearing condition, determine equilibrium third-party prices. We characterize the structure of optimal contracts and show they take simple forms—either full coverage after a deductible is paid or limited coverage with an out-of-pocket maximum—closely mirroring real-world insurance plans.
Identifying the role of expected fertility as a driver of gender discrimination is crucial to guide policy solutions, but is hindered by the fact that pregnancy discrimination is typically addressed by broader gender-discrimination policies. This was not the case in the U.S., where before the 1978 Pregnancy Discrimination Act (PDA) pregnancy constituted a legal exception to existing gender discrimination laws. Exploiting states’ staggered adoption of laws similar to the PDA, we use difference-in-differences estimates based on survey data to show that the PDA reduced employment and hiring of women of fertile age, while having no detectable effect on dismissals. Our estimates imply that nearly 30% of the gender employment gap at the time was due to potential fertility. A simple search-and-matching model explains these results: by raising firing costs for discriminating employers, the PDA discouraged hiring but was not enforced strongly enough to prevent dismissals of pregnant employees. Finally, we show that pre-existing equal pay laws limited wage adjustments, exacerbating the negative effect on employment.