Labor leverage, coordination failures, and aggregate risk

Coordination Failures

Aggregate Labor Supply

___________________________________________________________________ There have been tremendous advances in macroeconomics, following the introduction of labor supply into the field. Today it is widely acknowledged that labor supply matters for many key economic issues, particularly for business cycles and tax policy analysis. However, the extent to which labor supply matters for such questions ...

On Coordinating Coordination Failures

This paper examines whether a principal with limited knowledge of agents’ actions can use an income tax scheme to uniquely implement the Pareto optimal equilibrium in a coordination game (i.e. a game with multiple Pareto-ranked equilibria). We show that, in contrast to games with externalities but a unique equilibrium, implementation in coordination games fails generically unless the identity o...

Equilibria with Coordination Failures

This paper extends the literature on equilibria with coordination failures to arbitrary convex sets of admissible prices. This makes it possible to address coordination failures for cases with price indexation or more general price linkages between commodities. We introduce a new equilibrium concept, called quantity constrained equilibrium (QCE), giving a unified treatment to all cases consider...

Aggregate Leverage and Preemptive Selling by Individual Financial Institutions

Our paper studies an economy in which each financial institution takes into account that if it has to sell its assets after others have already sold, the price will be lower. This causes preemptive selling, driven not by actual margin calls, but by the fear of future margin calls. Financial institutions cannot determine their optimal capitalizations in isolation, but need to know the aggregate ...