We study the impact of frictions on the prevalence of systemic crises. Agents privately learn about a fixed payoff parameter, and repeatedly adjust their investments while facing transaction costs in a dynamic global game. The model has a rich structure of externalities: payoffs may depend on...

We study the impact of frictions on the prevalence of systemic crises. Agents privately learn about a fixed payoff parameter, and repeatedly adjust their investments while facing transaction costs in a dynamic global game. The model has a rich structure of externalities: payoffs may depend on...

We propose two characteristics of beliefs and study their role in shaping the set of rationalizable strategy profiles in games with incomplete information. The first characteristic, type-sensitivity, is related to how informative a player thinks his type is. The second characteristic, optimism,...

We propose two characteristics of players' beliefs and study their role in shaping the set of rationalizable strategy profiles in games with incomplete information. The first characteristic, type-sensitivity, is related to how informative a player thinks his type is. The second characteristic,...

This paper proposes an axiomatic approach to study two-player infinitely repeated games. A solution is a correspondence that maps the set of stage games into the set of infinite sequences of action profiles. We suggest that a solution should satisfy two simple axioms: individual rationality and...