Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/293978 
Authors: 
Year of Publication: 
2024
Series/Report no.: 
ECONtribute Discussion Paper No. 295
Publisher: 
University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
Abstract: 
I endogenize the probability of self-fulfilling outcomes in a game where the only uncertainty comes from extrinsic sunspots. There is a group of players wishing to coordinate on the same action and another player, the regime defender, whose action affects the payoff from coordination. The coordinating players' actions can be based on a sunspot state, which, unlike in the classic sunspot approach, is observed with a small, idiosyncratic noise (a private sunspot). I show how private sunspots, combined with the action of the regime defender, can be used to derive a unique coordination probability in any equilibrium where sunspots influence actions. I show how this approach can be used to determine the probability of a sunspot-driven bank run.
Subjects: 
Coordination problems
sunspots
strategic uncertainty
JEL: 
D70
D84
G01
Document Type: 
Working Paper

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