Coordination failure and its consequences: Three essays

We develop game-theoretic models of coordination to examine how the shadow of ex-post coordination failure influences ex-ante behaviour. In Chapter 2, we study the link between cyber risk and financial stability in banking. We embed a canonical global game of bank runs in a coordination game among banks that features a trade-off between a public good (the cybersecurity of a digital platform) and a private good (bank operational resilience). Rollover risk informs investment of working capital into cybersecurity, with the production of cybersecurity having weakest-link characteristics. System-wide cybersecurity provision is constrained inefficient and regulatory measures, such as negligence rules and cyber hygiene notices, facilitate the socially optimal level of cybersecurity investment. In Chapter 3, we extend the classic regime change global game of currency crises by introducing tail risk to reflect model uncertainty over the distribution of fundamentals. We find a non-monotonic relationship between tail risk and the probability of a fundamentals-based crisis. Active intervention by policymakers produces doubt about the level of fundamentals and, hence, how others will respond. The model sheds new light on the role of the German debt moratorium during the sterling crisis of 1931. In Chapter 4, we examine the relationship between lock-in and miscoordination in a model of cultural assimilation. In an effort to coordinate behaviour, individuals take others’ perspectives and find it easier to put themselves into the shoes of members of their own cultural group. When individuals assimilate, they become locked in to a behaviour that does not align with their values. The nation building policies pursued by politically motivated governments do not always align with those of a social planner. The results qualify the benefits of assimilationist nation building and generate testable implications for future work.

Name thesis:degree_name

PhD

Level thesis:degree_level

Doctoral

Discipline thesis:degree_discipline

Economics

Grantor dc:publisher

ResearchSpace@Auckland

Year dc:date.issued

2022

Author dc:creator

• Duley, Chanelle Lynn

Advisors dc:contributor.advisor

• Gai, Prasanna
• Lippert, Steffen

Statement dc:rights

• Items in ResearchSpace are protected by copyright, with all rights reserved, unless otherwise indicated.

Licence dc:rights.uri

• https://researchspace.auckland.ac.nz/docs/uoa-docs/rights.htm

Handle dc:identifier.uri

https://hdl.handle.net/2292/63772

OAI identifier oai:identifier

oai:researchspace.auckland.ac.nz:2292/63772