On the hardness of designing public signals

Abstract Recent reforms have given regulators broad powers to “bail-in” bank creditors during financial crises. We analyze efficient bail-ins and their implementation. To preserve liquidity, regulators must avoid signaling negative private information to creditors. Therefore, optimal bail-ins in bad times only depend on public information. As a result, the optimal policy cannot be implemented if regulators have wide discretion, due to an informational time-inconsistency problem. Rules mandating tough bail-ins after bad public signals, or contingent convertible (co-co) bonds, improve welfare. We further show that bail-in and bailout policies are complementary: if bailouts are possible, then discretionary bail-ins are more effective.

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Private Strategies in Finitely Repeated Games with Imperfect Public Monitoring

Contributions in Theoretical Economics ◽

10.2202/1534-5971.1046 ◽

2002 ◽

Vol 2 (1) ◽

Cited By ~ 16

Author(s):

George J. Mailath ◽

Steven A. Matthews ◽

Tadashi Sekiguchi

Keyword(s):

Nash Equilibrium ◽

Repeated Games ◽

Finitely Repeated Games ◽

Game Equilibrium ◽

Public Signals ◽

Stage Game ◽

Public Monitoring ◽

Public Signal ◽

Action Profile

We present three examples of finitely repeated games with public monitoring that have sequential equilibria in private strategies, i.e., strategies that depend on own past actions as well as public signals. Such private sequential equilibria can have features quite unlike those of the more familiar perfect public equilibria: (i) making a public signal less informative can create Pareto superior equilibrium outcomes; (ii) the equilibrium final-period action profile need not be a stage game equilibrium; and (iii) even if the stage game has a unique correlated (and hence Nash) equilibrium, the first-period action profile need not be a stage game equilibrium.

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Sino-American Relations and the Vietnam War, 1964–66

The China Quarterly ◽

10.1017/s0305741000033695 ◽

1976 ◽

Vol 66 ◽

pp. 293-314 ◽

Cited By ~ 4

Author(s):

Frank E. Rogers

Keyword(s):

United States ◽

East Asia ◽

Vietnam War ◽

International Politics ◽

The United States ◽

South East Asia ◽

Republic Of China ◽

Public Signals ◽

The Vietnam War ◽

The 1960S

Perceptions as well as realities have always played an important role in international politics and it is frequently difficult to separate the two. By the 1960s the realities of increased American involvement in South east Asia and a more militarily and politically influential China heightened the possibility of a Sino-American confrontation. It is the thesis of this study that the United States and the People's Republic of China, both fearful of that possibility as a spill-over from the conflict in Indochina, reached a tacit understanding limiting their involvement. This understanding was transmitted through a series of subtle public signals and, quite possibly, by a number of confidential communications. The primary motive was to prevent an unwanted Sino-American con frontation which could have resulted from a misperception of intentions. As will be demonstrated in this study both Peking and Washington sought, on a number of occasions, to transmit their intentions in order to prevent misperceptions and possible over-reactions.

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