PhD Thesis Defense, Economics and Decision Sciences, T. Rivera
Thomas J. Rivera, Economics and Decision Sciences Specialization, will defend his PhD Thesis: 'Essays on Game Theory, Mechanism Design, and Financial Economics' .
Abstract: This thesis develops and utilizes tools in game theory and mechanism design to study multiple applications in economics and ﬁnance. The ﬁrst chapter studies the problem of implementing communication equilibria of strategic games when players communicate with an impartial mediator through a network. I characterize necessary and suﬃcient conditions on the network structure such that any communication equilibrium of any game can be implemented on that network. The next chapter studies a model of supply chain congestion whereby capacity constraints lead to very ineﬃcient Nash equilibria and I show how the use of correlated equilibria can substantially resolve those ineﬃciencies. The ﬁnal two chapters study related issues in the design of bank capital requirements. In Chapter 3, I characterize optimal bank capital requirements when banks have private information about the value of their existing assets. I show how the implementation of capital requirements can eliminate the bank’s cost of raising capital by revealing their information to the market and conditions under which doing so is optimal. In Chapter 4, I show how when the bank’s private information is about the riskiness of its assets instead, then any risk sensitive capital requirement will lead banks to optimally misreport their risk whenever investors are suﬃciently risk averse, highlighting important robustness concerns.