This paper explores a unique equilibrium model of ''informational'' financial contagion. Extending the global game model of Morris and Shin (1999), I show that the failure of a single firm can trigger a chain of failures merely by affecting the behavior of investors. In contrast to the existing...

We modify the basic Gehrig (1993) model. In this model, individual agents are either buyers or sellers. They can choose between joining the search market, joining the monopolistic intermediary or remaining inactive. In the search market, agents are randomly matched and the price at which...

We study the role of whistle-blowing in the following inspection game. Two agents who compete for a valuable prize can either behave legally or illegally. After the competition, a controller investigates the agents' behavior. This control game has a unique equilibrium in mixed strategies. We...

We present experimental evidence of a link between economic literacy and inflation forecast accuracy. The experiment investigates two channels through which economic literacy may enable better forecasts: (i) choice of information and (ii) use of information. More literate subjects choose more...

We present new experimental evidence on heterogeneity in the formation of inflation expectations and relate the variation to economic literacy and demographics. The experimental design allows us to investigate two channels through which expectations-formation may vary across individuals: (1) the...

This paper develops a global game model that allows for a rigorous analysis of partial deposit insurance and provides the first comparative statics of the optimal level of deposit coverage. The optimal amount of coverage increases with lower bank liquidity requirements, with a higher precision...

Assessing financial stability is an issue of rapidly growing importance to central banks and banking authorities. This paper explores an extensive panel data set of Swiss banks to identify macroeconomic influencing factors on bank profitability and to quantify their impact on bank...

Assessing financial stability is an issue of rapidly growing importance to central banks and banking authorities. This paper explores an extensive panel data set of Swiss banks to identify macroeconomic influencing factors on bank profitability and to quantify their impact on bank...

This paper explores a global game model of information-based financial contagion. By revealing information on a common fundamental factor and thereby affecting the behavior of creditors, the failure of a single firm can trigger the failure of another firm. The model provides a unique equilibrium...

We study the role of whistleblowing in the following inspection game. Two agents who compete for a prize can either behave legally or illegally. After the competition, a controller investigates the agents’ behavior. This inspection game has a unique (Bayesian) equilibrium in mixed strategies....