Collusion and soft budget constraint are two conspicuous phenomena in transition economies¡¯ banking system. Literature has separately investigated those two phenomena from theoretical point of views. However, the cross-point of both phenomena has been neglected in the research of banking...

Policy towards speculative bubbles is examined in a model of a finite horizon 'greater fool' bubble, with rational agents, asymmetric information and short-sales constraints. This model permits the use of standard tools of comparative dynamics and welfare economics to analyze bubble policies....

We introduce ex-ante collusion whereby the supervisor stops monitoring for a transfer payment from the agent, in addition to ex-post collusion following the monitoring outcome. Extending a well-known model of hierarchy, we study the determinants of ex-ante collusion and show that, depending on...

We analyze an economy with asymmetric information and endogenize the possibilities for information transmission between members of a coalition. We then define a concept of the Core that takes into account these communication possibilities. The internal consistency of the improvements is...

This paper describes a principal-agent relationship with a supervisor who has information about the agent. The agent and the supervisor have the possibility to collude and misinform the principal. In accordance with the existing literature there exists an optimal contract which excludes...

The current debate on the new Basel Accord gives rise to a natural question about the appropriate form of capital regulation.We construct a simple framework to analyze this issue. In our model the risk carried by a bank as well as managerial risk preference are a bank's private information. We...