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We develop a model of psychological-games-played-on-a-network to demonstrate a role for endogenously determined, rationally chosen ethics. Our analysis produces sharp results about contagion of nonethical or ethical behavior and the possible equilibrium configurations of each type of behavior. We find, and quantify, critical densities for clusters of each type of behavior that determine everything about contagion. We introduce society as a third player to investigate ethical failures as externalities. We use these results to show how regulations and network structure can affect whether clusters of ethical behavior can survive and how large they can be in a financial market setting. [ABSTRACT FROM AUTHOR]

Against the backdrop of COVID-19, we study how the interactions of mutual funds and dealers introduce fragility to the municipal bond market and induce lasting market impacts. During the crisis, trading surges, whereas dealers' liquidity provision plunges for mutual-fund-held bonds, leading to greater price depressions in these bonds. Importantly, the crisis reshapes the market's perceptions of mutual fund fragility risks, with the aftermath-yield spreads widening significantly more for bonds with greater mutual fund exposures. Such postcrisis pricing effects reflect dealers' continued reluctance to provide liquidity for mutual fund–held bonds, and they are stronger for bonds whose mutual fund holders are more susceptible to investor runs. This paper was accepted by Victoria Ivashina, finance. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2023.4912. [ABSTRACT FROM AUTHOR]

Blockchain-based cryptocurrencies must solve the problem of assigning priorities to competing transactions. The most widely used mechanism involves each transaction offering a fee to be paid once the transaction is processed, but this discriminatory price mechanism fails to yield stable equilibria with predictable prices. We propose an alternate fee setting mechanism, StableFees, that is based on uniform price auctions. We prove that our proposed protocol is free from manipulation by users and miners as the number of users and miners increases and show empirically that gains from manipulation are small in practice. We show that StableFees reduces the fees paid by users and reduces the variance of fee income to miners. Data from December 2017 show that, if implemented, StableFees could have saved Bitcoin users $272,528,000 USD in transaction fees while reducing the variance of miner's fee income, on average, by a factor of 7.4. We argue that our fee protocol also has important social welfare and environmental benefits. This paper was accepted by Agostino Capponi, Special Section of Management Science: Blockchains and Crypto Economics. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2023.4735. [ABSTRACT FROM AUTHOR]

Corporate bond trading is evolving. Dealers, long central to bond trading, still play a critical role, but new technologies have created more competitive and transparent markets. There are fewer dealers now, and market concentration has increased, but execution costs are far lower than in the past, and bond market volume has soared. Small bond trades now execute at approximately the same transaction costs as large block trades. Yet, although corporate bond markets are better, they are not perfect. Match making as opposed to market making leaves the bond market susceptible to periodic illiquidity. Bond issues more subject to information leakage or those that are highly illiquid still trade almost entirely with dealers. There is still limited pretrade transparency, which hurts bond customers both large and small. Overall, however, bond markets are better. [ABSTRACT FROM AUTHOR]