Diffusing Coordination Risk

Basak, D and Zhou, Z (2018) Diffusing Coordination Risk. Working Paper. SSRN.

Full text not available from this repository. (Request a copy)


In a regime change game, agents sequentially decide whether to attack or not, without observing the past actions by others. To dissuade them from attacking, a principal adopts a dynamic information disclosure policy - repeated viability tests. A viability test publicly discloses whether the regime has survived the attacks so far. When such tests are sufficiently frequent, in the unique cutoff equilibrium, regardless of their private signals, agents never attack if the regime passes the latest test. We apply our theory to show that by sufficiently diffusing the rollover choices across different maturity dates, a borrower can eliminate panic-based runs.

Item Type: Monograph (Working Paper)
Subjects: Economics
Date Deposited: 15 May 2019 15:55
Last Modified: 15 May 2019 15:55
URI: https://eprints.exchange.isb.edu/id/eprint/962

Actions (login required)

View Item
View Item