A local interaction game is a game where agents play an identical stage A local interaction game is a game where agents play an identical stage game against their neighbors over time. This paper obtains a general result on the long-run equilibrium distribution of the local interaction game whose...

The paper analyzes a very stylized model of crises and demonstrates how the degree of strategic complementarity in the actions of investors is a critical determinant of fragility. It is shown how the balance sheet composition of a financial intermediary, parameters of the information structure...