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Abstract: In a regime change game, privately informed agents sequentially decide whether to attack without observing others’ previous actions. To dissuade them from attacking, a principal adopts a dynamic information disclosure policy – frequent viability tests. A viability test publicly discloses whether the regime has survived the previous attacks. When such tests are sufficiently frequent, in the unique cutoff equilibrium, agents never attack if the regime passes the latest test, regardless of their private signals. We apply this theory to demonstrate that a borrower can eliminate panic-based runs by sufficiently diffusing the rollover choices across different maturity dates.

Presentation: (By one of the authors) NYU Financial Economics workshop, Royal Economic Society Meetings2015, Society of Economic Dynamics Meetings2015, Global Games at Ames, CICF2016, UECE Lisbon meetings in Game Theory and Applications, Delhi Theory Meetings, CUHK (SZ), Asian Econometric Society meetings2017 (Hong Kong), North American Econometric Society Meetings2017 (St. Louis), International Conference on Game Theory (Stony Brook), SERI 2017, European Econometric Society Meetings2017 (Lisbon), Penn State, NYU Shanghai, IIM Ahmedabad