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We use a game theoretical framework to analyze the intraday behavior of banks with respect to settlement of interbank claims in a real-time gross settlement setting. The game played by banks depends upon the intraday credit policy of the central bank and it encompasses two well-known game theoretical paradigms: the prisoner’s dilemma and the stag hunt. The(More)
In standard auctions with symmetric, independent private value bidders resale creates a role for a speculator—a bidder who is commonly known to have no use value for the good on sale. For second-price and English auctions the efficient value-bidding equilibrium coexists with a continuum of inefficient equilibria in which the speculator wins the auction and(More)
When second-price auctions have been conducted in the laboratory, most of the observed bids have been “overbids” (bids that exceed the bidder’s value) and there are very few underbids. Few if any of the subjects in those experiments had any prior experience bidding in auctions. We report on sealed-bid second-price auctions that we conducted on the Internet(More)
We show how the interbank payment system can become illiquid following wide-scale disruptions. Two forces are at play in such disruptions—operational problems and changes in participants’ behavior. We model the interbank payment system as an n-player game and utilize the concept of a potential function to describe the process by which one of multiple(More)
Transplants of donated stem cells save the lives of many patients with blood diseases. Donation is somewhat painful, but rarely has lasting adverse effects. Patients can accept transplants only from donors with compatible immune systems. Those lacking a sibling match must seek donations from the population at large. The probability that two persons of the(More)
This paper contributes to the literature on second-price auctions with resale. We add speculators—bidders with value zero—to the standard symmetric independent private values environment. There always exists a continuum of inefficient equilibria that are profitable for a speculator. With no reserve price in the initial auction, speculation can enhance the(More)
A model of coalition government formation is presented in which inefficient, nonminimal winning coalitions can form in Nash equilibrium. Predictions for five games are presented and tested experimentally. The experimental data support potential maximization as a refinement of Nash equilibrium. In particular, the data support the prediction that non-minimal(More)
We use a method similar to Google’s PageRank procedure to rank banks in the Canadian Large Value Transfer System (LVTS). Along the way we obtain estimates of the payment processing speeds for the individual banks. These differences in processing speeds are essential for explaining why observed daily distributions of liquidity differ from the initial(More)