Search

My thesis consists of three chapters on information economics and financial economics.Chapter 1:Many decentralized over-the-counter (OTC) markets have recently become subject to new regulations requiring transparency. I build up an information model that features bilateral trade in a double auction, endogenous public signal, and inter-dealer network formation to study the effect of TRACE on the inter-dealer markets. In the trading stage, I study the private information diffusion process and endogenize the public information contained in the disseminated trading price. I show that in markets with a relatively low degree of information asymmetry, post-trade transparency makes the adverse selection more severe and reduces the surplus from asset reallocation between dealers, and thus hurts the inter-dealer network formation. Investors are more likely to be symmetrically uninformed about thinly traded bonds. The empirical results provide evidence that TRACE has a significant negative effect on the inter-dealer trading frequency for thinly traded bonds.Chapter 2 (with Kim-Sau Chung):During currency crises, large traders once simultaneously short the asset markets and currency market. We study the large trader's information manipulation in crises by introducing a large trader in an asset market and a currency-attack coordination game with imperfect information. The asset price realized in the asset market aggregates dispersed private information acting as a public signal in the currency attack game. We show that the incentive of the large trader to manipulate the asset price in favor of its currency attack leads to financial contagion. In equilibrium, the large trader's manipulating the asset price to be lower and attacking the currency regime are concurrent; the large trader's manipulation in the asset market is most significant when the public signal is in the intermediate range. To draw policy implication regarding the market transparency, we show that when the asset market is transparent, a natural equilibrium refinement that incorporates forward induction reasoning would select the equilibrium where every trader behaves most aggressively in the currency-attack game and the currency regime is most fragile.Chapter 3 (with Yinqiu Lu):The way central banks manage their foreign reserve assets has evolved over the past decades. One major trend is managing reserves in two or more tranches -- liquidity tranche and investment tranche -- especially for those with adequate reserves. Incorporating reserve tranching, we have developed in this paper a central bank’s reserve portfolio choice model to analyze the determinants of the currency composition of reserves. In particular, we adopt the classical mean-variance framework for the investment tranche and the asset-liability framework for the liquidity tranche. Building on these frameworks, the roles of currency compositions in imports invoicing and short-term external debt, and risk and returns of reserve currencies can be quantified by our structural model -- a key contribution of our paper given the absence of structural models in the literature. Finally, we estimate the potential paths of the share of RMB in reserves under different scenarios to shed light on its status as an international currency.

We design a laboratory experiment to test the importance of wealth as a channel for financial contagion across markets with unrelated fundamentals. In a sequential global game, we analyze the decisions of a group of investors that hold assets in two markets. We consider two treatments that vary the level of diversification of these assets across markets. In both treatments, we find evidence of financial contagion. When investors have completely diversified portfolios, we provide evidence of contagion due to a wealth effect: for certain ranges of fundamentals, we show that a decrease in wealth from the investment in the first market makes withdrawals more likely in the second, thereby increasing the probability of a crisis. When portfolio diversification is small, then social imitation is relevant in explaining contagion.

I giochi globali sono definiti come giochi di informazione incompleta il cui spazio dei tipi è determinato dai giocatori che osservano ciascuno un segnale rumoroso dello stato sottostante. Negli ultimi anni, si sono dimostrati utili per modellare problemi a vari campi come i cambi di regime, le corse agli sportelli, le crisi valutarie e la determinazione del prezzo del debito. La discussione si concentra sulla modellizzazione dei fenomeni di rivolta di massa attraverso i giochi globali. In questo contesto, i giocatori utilizzano strategie cutpoint, ossia partecipano alla protesta se la loro informazione è sufficientemente alta. L'aspetto interessante è delineare come l'equilibrio e gli esiti del gioco siano influenzati sia dalle azioni degli attori strategici sia dalle caratteristiche della società. Il fenomeno delle rivolte di massa è stato originariamente trattato come un gioco di coordinamento a informazione completa. Questo tipo di gioco prevede la presenza di due equilibri, uno con partecipazione totale e uno con partecipazione nulla, in modo che qualsiasi tipo di variazione strutturale o strategica non influenzi l'esito del gioco o lo ribalti. L'approccio dei giochi globali al fenomeno delle rivolte di massa si realizza attraverso la classe di modelli noti come giochi globali di cambiamento di regime e, contrariamente al caso precedente, non solo inducono un unico equilibrio finito, ma le variazioni strutturali o strategiche causano continue variazioni nell'equilibrio e di conseguenza sia nella massa dei cittadini che protestano sia nelle probabilità degli esiti del gioco. Questo contrasto può essere risolto con modelli innovativi in cui, in un contesto di gioco a informazione incompleta, eliminando le condizioni che inducono l'unicità dell'equilibrio nei giochi globali, è possibile costruire un gioco che fornisce sia un equilibrio finito con la proprietà di scorrevolezza dei giochi globali, sia equilibri infiniti di mobilitazione totale o nulla, tipici dei giochi di coordinamento a informazione completa, mantenendo i vantaggi dei due approcci. L'obiettivo del nostro lavoro è quello di arricchire questo approccio considerando la sua bontà in termini di interpretazione. Ciò si traduce sia in una descrizione della composizione della popolazione in termini strategici, sia in una definizione analitica del punto di equilibrio e delle funzioni che definiscono il livello di mobilitazione. Ciò consente non solo di ricavare la forma analitica delle probabilità degli esiti del gioco, ma anche di effettuare uno studio di statica comparata, osservando come le variazioni strutturali e strategiche influenzino il gioco a ogni livello. Il secondo obiettivo è quello di caratterizzare meglio il ruolo dei rivoluzionari attraverso lo studio del gioco senza la presenza di un'avanguardia rivoluzionaria e quindi senza alcun segnale pubblico di confronto con il gioco originale. Questo offre anche la possibilità di ridisegnare il gioco valutando le distribuzioni dei parametri del gioco. Il terzo compito è quello di ridisegnare strutturalmente il gioco in modo che la molteplicità degli equilibri sia legata alla possibilità di osservare una mobilitazione nulla o positiva, eliminando così la possibilità che gli equilibri finiti che definiscono il livello di mobilitazione siano molteplici e soprattutto che si comportino in modo logico rispetto a variazioni strutturali o strategiche. Ciò si traduce nella concezione di nuove matrici di payoff o di funzioni di costo interpretabili. L'ultima parte è legata allo studio della funzione di distribuzione cumulativa della normale standard con l'obiettivo sia di individuare proprietà utili nello studio della statica comparata sia di definire un'approssimazione per la stima del punto di equilibrio. Global games in literature are commonly defined as games of incomplete information whose type space is determined by the players each observing a noisy signal of the underlying state. Over the past few years, they have proved useful in modelling scenarios and problems related to various fields of application like regime change, bank runs, currency crises, pricing debt. Our discussion focuses on modelling the phenomena of mass uprisings through the global games. In this context, players use cutpoint strategies, i.e. they participate in the protest if their information level is sufficiently high. What is interesting is to outline how the equilibrium and outcomes of the game are influenced both by the actions of the strategic actors and the characteristics of the society. The phenomena of mass uprisings were originally treated as complete information coordination game. This type of game typically involves the presence of two equilibria, one with total participation and one with zero participation, so that any type of structural or strategic variation either does not influence the outcome of the game or overturns it. The global games approach to the phenomena of mass uprisings is realized through the class of models known as global game of regime change and contrary to the previous case induce not only an unique finite equilibrium, but structural or strategic variations cause continuous variations in the equilibrium and consequently in both the mass of protesting citizens and the probabilities of the outcomes of the game. This apparent contrast can be solved through innovative models where in a context of an incomplete information game by eliminating the conditions that induce uniqueness of the equilibrium in global games it is possible to construct a game that provides both a finite equilibrium with the desirable smoothness property of the global games and infinite equilibria of total or null mobilization typical of complete information coordination game retaining the advantages of the two approaches. First the aim of our work is to enrich this approach considering its goodness in terms of interpretation. This translates into both a more in-depth description of the composition of the population in strategic terms and an analytical definition of the equilibrium point and the functions that contribute to defining the level of mobilization. This makes it possible not only to derive the analytical form of the probabilities associated with the outcomes of the game, but also to carry out a comprehensive study of comparative statics by observing how structural and strategic variations influence the composition of the population in strategic terms and the game at each level. The second objective is to better characterize the role of the revolutionary entrepreneurs through the study of the game without the presence of a revolutionary vanguard and thus no public signal comparing it to the original game. This also offers the possibility of redesigning the game by evaluating distributions for the parameters of the game by recovering the randomness generated earlier by the public signal. The third task is to structurally redesign the game so that the multiplicity of equilibria is linked to the possibility of observing null or positive mobilization, thus eliminating the possibility that the finite equilibria defining the level of mobilization are multiple and above all that they behave logically in relation to structural or strategic variations. This mainly results in the conception of new payoff matrices or alternative cost functions that maintain a good level of intrepretability. Finally, given the complexity of the analytical treatment, the last part is devoted to the study of the cumulative distribution function of the standard normal distribution with the aim of both identifying additional properties useful in the study of comparative statics and defining a simple but reliable approximation for estimating the equilibrium point.

We consider the problem of a leader who can assign rewards for citizens for different anti-regime actions. Citizens face a coordination problem in which each citizen has a private, endogenous degree of optimism about the likelihood of regime change. Because more optimistic citizens are easier to motivate, the choice of optimal rewards entails optimal screening. This leads to a distribution of anti-regime actions. A key result is the emergence of a vanguard, consisting of citizens who engage in the endogenous, maximum level of action. Other citizens participate at varying degrees, with less optimistic citizens contributing less. We explore how the regime’s strength or the maximum reward available to the leader influences the distribution of actions. Moreover, we show that more heterogeneity (e.g., higher inequality) among potential revolutionaries reduces the likelihood of regime change. Our methodological contribution is that we deliver a sharp and novel marriage of screening and global games.

Players receive a return to investment that is increasing in the proportion of others who invest and the state and incur a small cost for acquiring information about the state. Their information is reflected in a stochastic choice rule, specifying the probability of a signal leading to investment. If discontinuous stochastic choice rules are infinitely costly, there is a unique equilibrium as costs become small, in which actions are a best response to a uniform (Laplacian) belief over the proportion of others investing. Infeasibility of discontinuous stochastic choice rules captures the idea that it is impossible to perfectly distinguish states that are arbitrarily close together and is both empirically documented and satisfied by many natural micro-founded cost functionals on information. Our results generalize global game selection results and establish that they do not depend on the specific additive noise information structure.

We experimentally test the effects of information quality in a global game of regime change. The game features a payoff structure such that more dispersed private information induces agents to attack more often and reduces regime stability in the Bayesian Nash Equilibrium. We show that subjects in the lab do not play as predicted by equilibrium theory. Instead, more dispersed information makes subjects more cautious, increasing regime stability. We show that this finding is consistent with a modified global game model in which agents engage in level- k thinking. In the level- k model, information quality affects agents’ actions through a novel channel, that enables a strategic attenuation effect. As information quality worsens, strategic complementarities between different level- k types weaken, generating a force that is capable of reversing the comparative statics from the equilibrium model.

We derive a new cost of information in rational inattention problems, the neighborhood-based cost functions, starting from the observation that many settings involve exogenous states with a topological structure. These cost functions are uniformly posterior separable and capture notions of perceptual distance. This second property ensures that neighborhood-based costs, unlike mutual information, make accurate predictions about behavior in perceptual experiments. We compare the implications of our neighborhood-based cost functions with those of the mutual information in a series of applications: perceptual judgments, the general environment of binary choice, regime-change games, and linear-quadratic-Gaussian settings. (JEL C70, D11, D82, D83, D91)

We analyze a regime change game in which an active defender can invest in costly, unobservable defenses. We show that if there are sufficiently many potential attackers, the game has a unique Nash equilibrium in which the defender chooses to have almost no defenses and attacks almost never occur. This provides a new perspective on coordination problems and the necessity of refinements in regime change games.

Mega-events are global affairs with profound effects across a variety of scales, and are the focus of a large and growing body of academic inquiry. This special section in Sports in Society centers on the urban and economic impacts of mega-events on the societies that host them, offering an examination of individual cases and emerging patterns. The authors explore different dimensions of the recent mega-event expe- rience from around the world, proposing novel ways of theorizing these outsized expressions of transnational sport, politics, commerce, and culture. Combined, these contributions unpack how socio-economic and cultural contexts shape the organization of events and impact hosts in variegated and contingent ways in the Global North, South, and East. This introduction offers a brief overview of the landscape of the existing research before summarizing each contribution and placing them in context within the broader literature. All told, the articles in this special section explore how the Olympics, the FIFA Men’s World Cup and the Commonwealth Games deploy different mechanisms to transform urban space, and offer innovative means of understanding what mega- events can do to the people and places that host them.

Chinese fans of domestic sports clubs have received scant scholarly attention. This study addresses this literature gap by exploring the fan culture associated with supporters of Guangzhou Football...

Enhancing individuals’ preparedness to work across borders is of growing importance. This study explores the role of Cultural Intelligence and Psychological Empowerment in enhancing Task Performanc...

Despite events such as the Paralympics, global games, and Special Olympics, sport is generally structured in a way that provides limited or no categories for people with disability to take part in a fair contest. The exclusion of children with disability from sporting opportunities result from the approach that sport is fixed and has a traditional structure, designed to identify the most able at certain activities. It is therefore often accepted that sport is simply something that children with disability may not be able to take part in. This article examines the appeal case of Holzmueller v Illinois High School Association, in which a High School track and field athlete challenged the structures of an athletics competition that did not provide separate categories for athletes with disability, other than wheelchair events. While the case is specific to the United States it represents a useful example of the complexities in the discrimination of children with disability when it comes to sport. By analysing Holzmueller using critical disability theory, this article demonstrates the challenge the law—statute and the judicial interpretation of it, has in preventing discrimination against people with disability in competitive sport.

We study experimentally how changes in the information structure affect behavior in coordination games with incomplete information (global games). We find two systematic departures from the theory: (1) the comparative statics of equilibrium thresholds and signal precision are reversed, and (2) as information becomes very precise subjects' behavior approximates the efficient equilibrium of the game, not the risk dominant one. We hypothesize that sentiments in the perception of strategic uncertainty could drive our results. To formalize this hypothesis we extend the standard model by introducing sentiments and we test this mechanism experimentally by eliciting beliefs. We find empirical support for our hypothesis: Subjects are over-optimistic about the actions of others when the signal precision is high and over-pessimistic when it is low. Thus, we show how changes in the information structure can give rise to sentiments that drastically affect outcomes in coordination games.

We study global games with strategic substitutes. Specifically, for a class of binary‐action, N‐player games with strategic substitutes, we prove that under payoff asymmetry, as incomplete information vanishes, the global games approach selects a unique equilibrium. We characterize this equilibrium profile ; players employ switching strategies at different cutoff signals, the order of which is directly determined by payoff asymmetry. We provide examples that illustrate our result and its connection with dominance solvability. We extend the global game literature, which has thus far been developed for games with strategic complementarities, to new applications in industrial organization, collective action problems, finance, etc .

Video game development is a complex endeavor, often involving complex software, large organizations, and aggressive release deadlines. Several studies have reported that periods of "crunch time" are prevalent in the video game industry, but there are few studies on the effects of time pressure. We conducted a survey with participants of the Global Game Jam (GGJ), a 48-hour hackathon. Based on 198 responses, the results suggest that: (1) iterative brainstorming is the most popular method for conceptualizing initial requirements; (2) continuous integration, minimum viable product, scope management, version control, and stand-up meetings are frequently applied development practices; (3) regular communication, internal playtesting, and dynamic and proactive planning are the most common quality assurance activities; and (4) familiarity with agile development has a weak correlation with perception of success in GGJ. We conclude that GGJ teams rely on ad hoc approaches to development and face-to-face communication, and recommend some complementary practices with limited overhead. Furthermore, as our findings are similar to recommendations for software startups, we posit that game jams and the startup scene share contextual similarities. Finally, we discuss the drawbacks of systemic "crunch time" and argue that game jam organizers are in a good position to problematize the phenomenon., Accepted for publication in IEEE Transactions on Games

Popular protests and palace coups are the two domestic threats to dictators. We show that free media, which informs citizens about their rulers, is a double-edged sword that alleviates one threat, but exacerbates the other. Informed citizens may protest against a ruler, but they may also protest to restore her after a palace coup. We develop a model in which citizens engage in a regime-change global game, and media freedom is a ruler’s instrument for Bayesian persuasion, used to manage the competing risks of coups and protests. A coup switches the status quo from being in the ruler’s favor to being against her. This introduces convexities in the ruler’s Bayesian persuasion problem, causing her to benefit from an informed citizenry. Rulers tolerate freer press when citizens are pessimistic about them, or coups signal information about them to citizens.

China's domestic mobile gaming firms, such as Tencent, which has developed into the world's biggest gaming firm by revenues in a short span, have outweighed the leading counterparts in the Western advanced economies. Despite an increasing attention has been paid to the global investment of Chinese gaming firms, this paper argues that their market expansion has focused on the selected Southeast Asian countries. This arguement is developed through the aurthors' extensive field investigation and personal interviews with games developers and publishers in Shenzhen, where Tencent is located, during the early 2017 and late 2019. We showcase that the protective multi‐scalar institutions in which the Chinese gaming firms have dominated in the domestic market, have prevented the overseas market expansion of these firms. Although the government‐designated extra‐local inter‐firm collaboration has helped narrow the technological gaps and articulate China’s firms into the global production networks, the market gaps between the domestic and western economies have not been overcome in the expansion to overseas markets. This study sheds light on that the market expansion of Chinese gaming firms has stucked in a dilemma between globalization and regionalization. While China’s domestic gaming firms, particularly Tencent, have been evolving into lead firms in the global games production networks, their market power has been confined at domestic and regional levels.

This article studies the effect of liquidity crises in short-term debt markets in a dynamic general equilibrium framework. Creditors (retail banks) receive imperfect signals regarding the profitability of borrowers (wholesale banks) and, based on these signals and their beliefs about other creditors’ actions, choose whether to roll over funding, or not. The unco-ordinated actions of creditors cause a suboptimal incidence of rollover, generating an illiquidity premium. Leverage magnifies this co-ordination inefficiency. Illiquidity shocks in credit markets result in sharp contractions in output. Policy responses are analysed.

Two main classes of channels are studied as informational sources of financial contagion. One is a fundamental channel that is based on real and financial links between economies, and the second is a social learning channel that arises when agents base their decisions on noisy observations about the actions of others in foreign markets. Using global games, I present a two‐country model of financial contagion in which both channels can operate and I test its predictions experimentally. The experimental results show that subjects do not extract information optimally, which leads to two systematic biases that affect these channels directly. Base‐rate neglect leads subjects to underweight their prior, and thus weakens the fundamental channel. An overreaction bias strengthens the social learning channel, since subjects rely on information about the behavior of others, even when this information is irrelevant. These results have significant welfare effects rooted in the specific way in which these biases alter behavior.