Deepal Basak

About Me: I work on research questions related to economic theory, financial economics, and political economy. More specifically, my work analyzes these questions through the lens of game theory and information economics.

Research

Topic: Don't Panic

A panic is an event in which a crisis occurs not because of weak fundamentals but because of strategic uncertainty (for instance, a bank run or sovereign debt default). In such problems, the players do not always act at the same time, and this can be an effective tool for persuasion. We study this problem from a dynamic adversarial information design perspective and find practical policies to reduce such panics.

• Panics and Early Warnings (with Zhen Zhou),  JPE 

How does a timely alert about the impending disaster eliminate panic?

• Diffusing Coordination Risk (with Zhen Zhou), AER

How do asynchronous moves help in coordination? 

• Frequent Stress Tests (with Mayur Choudhary and Zhen Zhou), working paper

How does conducting more stress tests help in averting bank runs?

Topic: Bargaining and Commitment

We study bargaining games, in which an underlying state (such as public opinion) determines the cost of commitment for the players and possible uncertainty about the state. We provide rational explanations for some widely observed but unexplained phenomena. We also analyze the efficiency implications.

• Gambling over Public Opinion (with Joyee Deb),  AER

Why do political parties wait and see which way the public opinion moves before agreeing, and how does it affect welfare? 

• Bargaining under Almost Complete Information, JET

Does a small probability of being uninformed make a large difference in bargaining?

• Social Value of Public Information in Bargaining,  EJ

Does more information about a player improve social welfare in bargaining?

• Aspiration and Bargaining (with Urmee Khan),  working paper

Why do people lowball or overreach instead of setting consistent aspirations in bargaining? 

Topic: Similarity

Algorithms steer different individuals toward different news and video content based on personal characteristics, thereby affecting the similarity of signal realizations among people and their behavior. We propose an order for comparing similarity and study how changes in similarity affect incentives in strategic environments.

• Comparing Similarity (with Joyee Deb and Aditya Kuvalekar), working paper

When are realizations from one joint probability distribution more similar than those from another? 

• Similarity of Information and Collective Action (with Joyee Deb and Aditya Kuvalekar), AER (Lead Article)

When does information similarity facilitate/impede collective action? 

Topic: Property Rights and Corrective Tax

• Optimal Tax under Dispersed and Distorted Beliefs (with Yunhui Zhao), JET R&R

How should optimal tax policy account for behavioral overreaction when agents receive private signals unobservable to the planner?

• Learning, Externality, and Optimal Financial Regulation (with Yunhui Zhao), JFS 

When does financial tranquility call for stringent regulation? 

• Alliance Acquisition and Excludability (with Krishnamurthy Subramanian), work in progress

When assets are non-excludable, which ownership structure is more efficient - alliance or acquisition?