When formal insurance is unavailable, mutual insurance among households can serve as an alternative. This paper analyzes a game between two agents who face uncertainty and maximize discounted utility without enforceable contracts or access to capital markets. While autarky is always a possible outcome, a mutually beneficial, trigger-strategy equilibrium can be achieved when the agents are sufficiently, but not necessarily equally, patient, and may have different distributions of income and willingness to bear risk. Full insurance is possible with strongly negatively correlated endowments, and partial insurance is generally feasible. Mutual insurance may well be able to coexist with organized banking and storage as these function in practice. The analysis has applications in various institutional settings, in particular to the custom of exogamy.

We study the interplay of capital and liquidity regulation, focusing on future funding risks. Our model features a banking sector with access to long-term illiquid investment opportunities, financed through short-term debt and equity issuance. The reliance on refinancing midway through the investment cycle is risky, as future investors may withhold funding if return prospects deteriorate. We derive two main findings. First, when liquidity shortfalls are rooted in concerns about future solvency, optimal capital regulation directly addresses the underlying fragility and renders liquidity regulation redundant. Second, in the absence of sufficient capital buffers, liquidity regulation can act as a partial substitute by stabilizing the bank’s asset side and improving resilience to shocks.

This investigation is focused primarily on the existence of Berge equilibrium in finite games. A secondary concern is the comparison of Berge equilibrium existence and Nash equilibrium existence.

Welfare and other properties of Berge equilibria are investigated. In particular, we address the questions to what extent Berge equilibrium can select from multiple Nash equilibria; can serve as a substitute for Nash equilibria; can Pareto improve upon Nash equilibrium. Furthermore, some of the recent results on the relation between Berge equilibria and Kantian equilibria are summarized.

The Braess paradox persists if drivers play mixed strategies. In equilibria in mixed strategies, traffic flows are almost the same as in equilibria in pure strategies.

We develop an extension of Luce's (Individual Choice Behavior: A Theoretical Analysis. Wiley, New York, 1959) model to apply multiattributes to stochastic choice. We consider an agent who focuses on selective (salient) attributes standing out in a choice set. These attributes are endogenously determined according to the criterion of Just Noticeable Difference. The criterion selects attributes whose variation impacts the agent enough so that she cares about each of them. When such selective attributes vary with the choice set, we adjust the choice probabilities for the elements of the choice set. We find that all the violations of Luce's axioms can be attributed to a change in selective attributes. When the global choice set is of the product form, selective attribute rules are characterized. In particular, the distinguished case of (non-selective) attribute rules can be characterized by two axioms, Independence from Irrelevant Alternatives and Separability.

We compare integration of economic, matching and networking markets. There can be losers from integration in all three cases, but their relative numbers depend on the type of market. There can be many losers from integration of pure exchange economies. There are relatively few losers from integration of networking markets. In the matching case, the relative numbers tend to lie between those of the other two cases. In particular, in the grand economy of matching markets, there are weakly more non-losers than losers, and with strict preferences there are weakly more gainers than losers.

We study the consequences and optimal design of bank deposit insurance and reinsurance in a general equilibrium setting. The model involves two production sectors, financed by bonds and bank loans, respectively. Financial intermediation by banks is required in the model as we assume that one of the production sectors is risky and requires monitoring by banks. Households fund banks through deposits and equity. Deposits are explicitly insured and banks pay a premium per unit of deposits. Any remaining shortfall is implicitly guaranteed by the government. Two types of equilibria emerge: One type of equilibria supports the Pareto optimal allocation. In the other type, bank lending and the default risk are excessively large. The intuition is as follows: the combination of financial intermediation by banks, limited liability of bank shareholders, and deposit insurance makes deposits risk-free from the individual households’ perspective, although they involve risk from the societal point of view. This distorts investment choices and the resulting input allocation to production sectors. We show, however, that a judicious combination of deposit insurance and reinsurance eliminates all non-optimal equilibrium allocations. Our paper thus may provide a benchmark result for policy proposals advocating deposit insurance cum reinsurance.

In a two-country general equilibrium setting, we study competition between governments with two policy tools: capital requirements and a bank tax. Since banks raise equity and deposits from domestic and foreign households, governments face cross-country externalities the sign of which depends on the extent of positive spillovers, i.e., revenues from taxing banks, and negative spillovers, i.e., deposit guarantee costs. We show that regulatory competition yields the efficient allocation when governments have at their disposal policy tools that enable them to optimally internalize domestic distortions. Our first finding is that this is the case when governments are not restricted by supranational regulation. Our second finding is that supranational regulation may or may not impede efficiency. This conclusion is the result of a detailed analysis where we consider conceivable supranational regulatory schemes, derive their welfare implications and identify those that cause inefficiencies.

We study the self-organization of a population into productive partnerships (or “firms”) when agents are confronted with a hold-up problem upon making relation-specific investments in those firms. The problem may be mitigated if agents can leave a partnership in which they have invested, bearing the costs yet foregoing the benefits of the investment, join another partnership, invest there anew, and appropriate the surplus created by the new investment. To capture the idea we introduce the notion of reinvestment-proof equilibria in which no agent has an incentive to reinvest or to change his investment in the current firm. We show that the presence of a small inefficient firm causes substantial efficiency gains in all larger firms.

Social psychology studies the “common enemy effect”, the phenomenon that members of a group work together when they face an opponent, although they otherwise have little in common. An interesting scenario is the formation of an information network where group members individually sponsor costly links. Suppose that ceteris paribus, an outsider appears who aims to disrupt the information flow within the network by deleting some of the links. The question is how the group responds to this common enemy. We address this question for the homogeneous connections model of strategic network formation, with two-way flow of information and without information decay. For sufficiently low linkage costs, the external threat can lead to a more connected network, a positive common enemy effect. For very high but not prohibitively high linkage costs, the equilibrium network can be minimally connected and efficient in the absence of the external threat whereas it is always empty and inefficient in the presence of the external threat, a negative common enemy effect. For intermediate linkage costs, both connected networks and the empty network are Nash for certain cost ranges.

We develop a model that combines competitive exchange of private commodities across endogenously formed groups with public good provision and global collective decisions. There is a tension between local and global collective decisions that can cause non-existence of competitive equilibria with endogenous household formation and public choice. In particular, we show that group formation and collective decisions on public goods may destabilize each other, even if there exist favorable conditions for matching on the one hand, and for global collective decisions on the other hand. We establish sufficient conditions for the existence of competitive equilibria with endogenous household formation and public choice and illustrate a variety of phenomena when households take local collective decisions and have a voice in global collective decisions.

We study the allocation of commodities through a two-stage hierarchy of competitive markets. Groups or countries trade at global prices while individuals within a group trade at local prices. We identify the free trade and the autarky equilibrium as polar cases. We show that no other two-stage market equilibria exist if the commodity space is two-dimensional. An example demonstrates that other, so-called intermediate equilibria exist for three-dimensional commodity spaces. The example also exhibits endogenous price distortions in third countries when some countries follow distortionary trade policies. We give two existence proofs for intermediate equilibria in higher dimensions. Each proof provides an explicit construction of special classes of intermediate equilibria.

Etwa 20% der Diabetiker, die einen progressiven Verlust der Nierenfunktion aufweisen, zeigen keine Albuminurie auf. Diese Patienten werden erst in einer späten Phase der diabetischen Nephropatie (DN) diagnostiziert und zu spät therapiert. Bislang liegen für diese Patientengruppe keine diagnostischen Empfehlungen vor. Da diese Patienten zu spät erkannt werden, führt die Erkrankung bei vielen dieser Patienten zur Dialysepflichtigkeit. CKD273 ist ein Urin-Proteom-Biomarker, der die Entwicklung von chronischen Nierenerkrankungen (CKD) vorhersagen kann.

We compare two partially separating equilibria in a job market signaling model with unproductive education. We find that in one of the two equilibria, the fraction of the population with a threshold education level is higher even though the cost of education is higher. Moreover, compared to the other equilibrium, the population faces a higher threshold education level, yet the educated attain lower wages. The reason for this result is that the gross return to education can be higher despite the higher cost of education and a higher threshold.