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Keywords:Game theory 

Settlement delays in the money market

We track 38,000 money market trades from execution to delivery and return to provide a first empirical analysis of settlement delays in financial markets. In line with predictions from recent models showing that financial claims are settled strategically, we document a tendency by lenders to delay delivery of loaned funds until the afternoon hours. We find that banks follow a simple strategy to manage the risk of account overdrafts - delaying the settlement of large payments relative to that of small payments. More sophisticated strategies, such as increasing settlement delays when own liquid ...
Staff Reports , Paper 319

Illiquidity in the interbank payment system following wide-scale disruptions

We show how the interbank payment system can become illiquid following wide-scale disruptions. Two forces are at play in such disruptions-operational problems and changes in participants' behavior. We model the interbank payment system as an n-player game and utilize the concept of a potential function to describe the process by which one of multiple equilibria emerges after a wide-scale disruption. If the disruption is large enough, hits a key geographic area, or hits a "too-big-to-fail" participant, then the coordination of payment processing can break down, and central bank intervention ...
Staff Reports , Paper 239

Learning from failure

We study decentralized learning in organizations. Decentralization is captured through a symmetry constraint on agents? strategies. Among such attainable strategies, we solve for optimal and equilibrium strategies. We model the organization as a repeated game with imperfectly observable actions. A fixed but unknown subset of action profiles are successes and all other action profiles are failures. The game is played until either there is a success or the time horizon is reached. For any time horizon, including infinity, we demonstrate existence of optimal attainable strategies and show that ...
Staff Report , Paper 299

Solution of linear-quadratic- Gaussian dynamic games using variational methods

Methods are presented for solving a certain class of rational expectations models, principally those that arise from dynamic games. The methods allow for numerical solution using spectral factorization algorithms and for estimation of these models using maximum likelihood techniques.
Staff Report , Paper 105

Working Paper
Codes of conduct, private information, and repeated games

We examine self-referential games in which there is a chance of understanding an opponent?s intentions. Our main focus is on the interaction of two sources of information about opponents? play: direct observation of the opponent?s code-of-conduct, and indirect observation of the opponent?s play in a repeated setting.
Working Papers , Paper 2012-031

Discussion Paper
Custom versus fashion: path-dependence and limit cycles in a random matching game

A pairwise random matching game is considered to identify the social environments that give rise to the social custom and fashion cycles. The game, played by Conformists and Nonconformists, can generate a variety of socially stable behavior patterns. In the path-dependence case, Conformists set the social custom and Nonconformists revolt against it; what action becomes the custom is determined by history. In the limit cycle case, Nonconformists become fashion leaders and switch their actions periodically, while Conformists follow with delay. The outcome depends on the relative share of ...
Discussion Paper / Institute for Empirical Macroeconomics , Paper 82

Working Paper
Conflict, evolution, hegemony, and the power of the state

In a model of evolution driven by conflict between societies more powerful states have an advantage. When the influence of outsiders is small we show that this results in a tendency to hegemony. In a simple example in which institutions differ in their ?exclusiveness? we find that these hegemonies will be inefficiently ?extractive? in the sense of having inefficiently high taxes, high compensation for state officials, and low welfare.
Working Papers , Paper 2013-023

Working Paper
A computationally efficient characterization of pure strategy Nash equilibria in large entry games

This note presents a simple algorithm for characterizing the set of pure strategy Nash equilibria in a broad class of entry games. The algorithm alleviates much of the computational burden associated with recently developed econometric techniques for estimating payoff functions inferred from entry games with multiple equilibria.
Finance and Economics Discussion Series , Paper 2005-37

Working Paper
Dynamic price competition and the theory of contestable markets

Finance and Economics Discussion Series , Paper 26

Working Paper
Stable cartels with a Cournot fringe

Working Papers , Paper 90-24


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