Departmental seminar

Wednesday, 16 February 2022, 15:00-16:15

Room: Zoom

Τhis study examines a simple banking system in a game-theoretic framework wherein banks act as self-interested agents to maximize leverage at the expense of overall financial stability. The resultant strategic inefficiency raises concerns about how banks manage the “financial stability” good, which is appropriated into a “tragedy of the commons”. We conceptualize the inefficiency using the -price of anarchy- introduced by Koutsoupias and Papadimitriou [2009].We seek the optimal regulatory framework that minimizes the -price of anarchy- or the degree of financial fragility.