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Ambiguity and Coordination in a Global. Game Model of Financial Crises

  • Daniel Laskar

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - CNRS - Institut national de la recherche agronomique (INRA) - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC))

We consider a two-player global game where creditors, who finance some investment project, have to decide whether to roll over their loans or not. We use a non-Bayesian approach where creditors exhibit some aversion to ambiguity. We show that an increase in ambiguity reduces the perceived coordination of players in rolling over their loans. This contibutes to increasing the probability of a financial crisis, and therefore provides an additional argument in favor of transparency in the model considered.

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Paper provided by HAL in its series PSE Working Papers with number halshs-00749500.

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Date of creation: Nov 2012
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Handle: RePEc:hal:psewpa:halshs-00749500
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  1. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June.
  2. David Schmeidler, 1989. "Subjective Probability and Expected Utility without Additivity," Levine's Working Paper Archive 7662, David K. Levine.
  3. Gajdos, Thibault & Tallon, Jean-Marc & Vergnaud, Jean-Christophe, 2004. "Decision making with imprecise probabilistic information," Journal of Mathematical Economics, Elsevier, vol. 40(6), pages 647-681, September.
  4. Sujoy Mukerji & Jean-Marc Tallon, 2003. "An overview of economic applications of David Schmeidler`s models of decision making under uncertainty," Economics Series Working Papers 165, University of Oxford, Department of Economics.
  5. Daniel Ellsberg, 2000. "Risk, Ambiguity and the Savage Axioms," Levine's Working Paper Archive 7605, David K. Levine.
  6. Itzhak Gilboa & David Schmeidler, 1989. "Maxmin Expected Utility with Non-Unique Prior," Post-Print hal-00753237, HAL.
  7. Carlsson, H. & Van Damme, E., 1990. "Global Games And Equilibrium Selection," Papers 9052, Tilburg - Center for Economic Research.
  8. Cheli, Bruno & Della Posta, Pompeo, 2007. "Self-fulfilling currency attacks with biased signals," Journal of Policy Modeling, Elsevier, vol. 29(3), pages 381-396.
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