The paper provides a critical summary of recent developments in banking and finance and discusses risk management strategies for banks and for banking supervision. Special attention is paid to systemic risks which arise because the nexus of interbank contracts is so complex that counterparty...

A complete characterization is given for the prices charged by Bertrand-Edgeworth duopolists with capacity constraints. In general, for the game in which firms' strategy spaces consist of price offers, Nash equilibrium involves nondegenerate mixed strategi es. Equilibria never extend below the...

A model of sovereign debt is analyzed. In this model, renegotiation arises in a natural way. Because information is incomplete, the renegotiation game has many equilibria. The standard contract theory approach suggests that the parties should agree to choose the efficient equilibrium strategies...

We propose a new approach to the normative analysis of public-good provision in an economy that is large so that any one individual is too insignificant to have a noticeable effect on the provision levels of public goods. In such an economy, the standard mechanism design problem of calibrating...

The debate on banking regulation has been dominated by flawed and misleading claims. The title of our book The Bankers New Clothes: What's Wrong with Banking and What to Do about It (Princeton University Press, 2013, see bankersnewclothes.com) refers to flawed claims about banking and banking...