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

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  • Daniel Laskar

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

Abstract

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.

Suggested Citation

  • Daniel Laskar, 2012. "Ambiguity and Coordination in a Global. Game Model of Financial Crises," Working Papers halshs-00749500, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00749500
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00749500
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    References listed on IDEAS

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    8. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(4), pages 643-669.
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    Cited by:

    1. Daniel Laskar, 2013. "Ambiguity, Pessimism, Optimism and Financial Crises in a Simple Global Game Model," Working Papers hal-00811923, HAL.
    2. Daniel Laskar, 2013. "Ambiguity, Pessimism, Optimism and Financial Crises in a Simple Global Game Model," PSE Working Papers hal-00811923, HAL.
    3. Laskar, Daniel, 2014. "Ambiguity and perceived coordination in a global game," Economics Letters, Elsevier, vol. 122(2), pages 317-320.

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