We argue that trust can be incentivised by measures which increase the ability of trusters to protect themselves against risk. We work within the framework originally established by Berg, Dickhaut and McCabe (1995) in which trust is measured experimentally as the ability to generate reciprocity...

We argue that trust can be incentivised by measures which increase the ability of trusters to protect themselves against risk. We work within the framework originally established by Berg, Dickhaut, and McCabe (1995) in which trust is measured experimentally as the ability to generate reciprocity...

This paper studies the comparative statics regarding changes in risk on Nash's solution to bargaining games with stochastic outcome and disagreement points. When absolute risk tolerance is linear with constant slope, the Nash's solution to bargaining with risky outcomes and risky disagreement...

We study the design of public information structures that maximize the probability of selecting a Pareto dominant equilibrium in symmetric (2 x 2) coordination games. Because the need to coordinate exposes players to strategic risk, we treat the designer as able to implement an equilibrium only...

For a fixed game and a type structure that admits a common prior, Action Independence states that the conditional beliefs induced by the common prior do not depend on the player's own strategy. It has been conjectured that Action Independence can be behaviorally characterized by means of a...

Interbank borrowing and lending may induce systemic risk into financial markets. A simple model of this is to assume that log-monetary reserves are coupled, and that banks can also borrow/lend from/to a central bank. When all banks optimize their cost of borrowing and lending, this leads to a...

When risks are interdependent, loss-prevention activities of one agent influence the risks faced by others. The social return to an investment in loss-prevention is greater than the private return. From a perspective of social welfare, the market allocation is not optimal and leads to...