This is the second of six volumes in a series of selected scientific papers by one of the world's most distinguished economists. Volume I presented the basic concepts in the Economics of Information, showing that markets in which information was imperfect or asymmetric (where some individuals know things that others don't) behave markedly different from how they would if information were perfect. Volume II, with papers written between 1969 and 2009, explores the implications of the New Information Paradigm for labor, capital, and product markets. This New Paradigm, for which Stiglitz was awarded the Nobel Memorial Prize in Economics in 2001, has fundamentally changed the way we think about every aspect of economics, raising new questions on corporate governance, and leading us to reconsider old questions on corporate finance, the relationship between finance and the economy, and the theory of economic incentives. While this volume focuses on the application of basic principles, it also extends the theory in important ways, showing the fruitfulness of Stiglitz's research strategy. In doing so, the papers set the ground for questioning some prevailing doctrines: key market phenomena cannot be explained by markets with rational expectations, even when information is imperfect. It demonstrates that how societies organize the obtainment, processing, and transmitting of information is as important as how they organize the production and distribution of goods. Indeed, the two issues are inseparable. The papers thus lay the foundations of a New Institutional Economics, not only describing how institutions (like sharecropping or banks) work and affect resource allocations, but why they arise and take on particular forms.

Table of Contents:
Preface to Volume II ; I: SURVEYS AND PERSPECTIVES ; Introduction ; 1. Information and Economic Analysis: A Perspective ; 2. Information and Competition ; II: CAPITAL MARKETS ; IIA: INFORMATION AND CAPITAL MARKETS ; Introduction ; 3. Information and Capital Markets ; 4. Using Tax Policy to Curb Speculative Short-Term Trading ; 5. Ownership, Control and Efficient Markets: Some Paradoxes in the Theory of Capital Markets ; 6. The Informational Content of Initial Public Offerings, with I. Gale ; 7. A Simple Proof that Futures Markets are Almost Always Informationally Imperfect, with I. Gale ; IIB: CREDIT AND EQUITY RATIONING ; Introduction ; 8. Incentive Effects of Termination: Applications to the Credit and Labor Markets, with A. Weiss ; 9. Credit Rationing and Collateral, with A. Weiss ; 10. Credit and Equity Rationing in Markets with Adverse Selection, with T. Hellmann ; IIC: STRUCTURE AND FUNCTIONING OF CAPITAL MARKETS ; Introduction ; 11. Information, Finance and Markets: The Architecture of Allocative Mechanisms, with B. Greenwald ; 12. Banks as Social Accountants and Screening Devices for the Allocation of Credit, with A. Weiss ; 13. Banks versus Markets as Mechanisms for Allocating and Coordinating Investment ; 14. Short-term Contracts as a Monitoring Device, with P. Rey ; 15. Pure Theory of Country Risk, with J. Eaton and M. Gersovitz ; 16. Discouraging Rivals: Managerial Rent-Seeking and Economic Inefficiencies, with A. Edlin ; III: INFORMATION AND LABOR MARKETS AND THE GENERAL THEORY OF INCENTIVES ; IIIA: INCENTIVES ; Introduction ; 17. A Survey of the Economics of Incentives ; 18. Incentives, Risk and Information: Notes Toward a Theory of Hierarchy ; 19. Prizes and Incentives: Toward a General Theory of Compensation and Competition, with B. Nalebuff ; 20. Design of Labor Contracts: Economics of Incentives and Risk-Sharing ; IIIB: EFFICIENCY WAGES ; Introduction ; 21. Alternative Theories of Wage Determination and Unemployment in L.D.C.'s: The Labor Turnover Model ; 22. Alternative Theories of Wage Determination and Unemployment: The Efficiency Wage Model ; 23. Equilibrium Unemployment as a Worker Screening Device, with B. Nalebuff and A. Rodriguez ; IIIC: WAGE DISTRIBUTIONS, SEARCH, AND THE EFFICIENCY OF MARKET EQUILIBRIUM ; Introduction ; 24. Equilibrium Wage Distribution ; 25. Labor Turnover, Wage Structure & Moral Hazard: The Inefficiency of Competitive Markets, with R. Arnott ; IV. THE PURE THEORY OF MORAL HAZARD AND INSURANCE ; Introduction ; 26. Risk, Incentives and Insurance: The Pure Theory of Moral Hazard ; 27. Price Equilibrium, Efficiency, and Decentralizability in Insurance Markets, with R. Arnott ; 28. Equilibrium in Competitive Insurance Markets, with Moral Hazard with R. Arnott ; V. INFORMATION AND PRODUCT MARKETS ; Introduction ; 29. Imperfect Information in Product Markets ; 30. The Theory of Sales: A Simple Model of Equilibrium Price Dispersion with Identical Agents, with S. Salop ; 31. Equilibrium in Product Markets with Imperfect Information ; 32. Competition and the Number of Firms in a Market: Are Duopolies More Competitive Than Atomistic Markets?