This paper introduces a model of endogenous network formation and systemic risk. In it, strategic agents form networks that efficiently trade-off the possibility of systemic risk with the benefits of trade. Efficiency is a consequence of the high risk of contagion which forces agents to...

We formulate a notion of stable outcomes in matching problems with one-sided asymmetric information. The key conceptual problem is to formulate a notion of a blocking pair that takes account of the inferences that the uninformed agent might make from the hypothesis that the current allocation is...

A large literature uses matching models to analyze markets with two-sided heterogeneity, studying problems such as the matching of students to schools, residents to hospitals, husbands to wives, and workers to firms. The analysis typically assumes that the agents have complete information, and...

This paper introduces a model of endogenous network formation and systemic risk. In it, agents form networks that efficiently trade-off the possibility of systemic risk with the benefits of trade. Second, fundamentally ‘safer’ economies generate higher interconnectedness, which in turn leads...

We formulate a notion of stable outcomes in matching problems with one-sided asymmetric information. The key conceptual problem is to formulate a notion of a blocking pair that takes account of the inferences that the uninformed agent might make. We show that the set of stable outcomes is...

We analyze the ex ante incentive compatible core for replicated private information economies. We show that any allocation in the core when the economy is replicated sufficiently often is approximately Walrasian for the associated Arrow-Debreu economy.