Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/320289 
Authors: 
Year of Publication: 
2025
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 20 [Issue:] 2 [Year:] 2025 [Pages:] 427-451
Publisher: 
The Econometric Society, New Haven, CT
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
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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