Job Market Paper 

Coordinating Climate Action Under Uncertainty [most recent draft]

 This paper studies the strategic interaction between two agents/countries deciding whether to take climate action. A climate action  is successful in restoring the environment if a critical mass of agents participate, providing a public good. This critical mass is interpreted as the current state of the environment and modelled as a continuous, noisily observed variable.  Depending on the state, agents may face either free ridding or coordination incentives. If one agent's action is sufficient to restore the environment, actions exhibit strategic substitutes and free riding incentives prevail. If the state is above a critical value, actions exhibit strategic complements; both agents need to coordinate for a success allowing for the possibility of a coordination failure.  This paper provides conditions on agents' utilities such that a coordination failure will be avoided whenever the participation of both agents is needed. To do so, we extend the global games framework to environments where agents' actions change between strategic substitutes and complements discontinuously in the underlying parameter. We show that risk-dominant actions can be strictly dominant at signals around the parameter value of such discontinuity, even if they are nowhere strictly dominant in the underlying complete information game, and iteratively strictly dominant in the whole range of signals at which they are risk-dominant. We provide conditions on agents' utilities that warrant this outcome. 

Work in Progress

Global Games without Solvable Games (joint with In-Uck Park) [draft]

We extend global games a la Carlsson and van Damme (1993) to environments where the risk-dominant equilibrium is selected even if there is no dominance solvable game in the underlying class of games. Strict dominance can emerge in the global game from discrete payoff changes of the underlying game at some state,and we provide sufficient conditions on payoff changes that warrant iterated dominance of the risk-dominant equilibrium. Thus, strategic uncertainty creates strictly dominant actions as well as fostering iterated dominance, in contrast to global games hitherto where strategic uncertainty does only the latter. Discrete payoff changes tend to arise, in particular, in situations where a public good can be provided with varying degrees of coordination depending on the state, so that coordinating actions can be strategic substitutes and free-riding incentives present. We illustrate our findings in a stylized regime change model. 

Controlling inflation with central bank communication (joint with Nikolaos Kokonas and Michalis Rousakis) [draft]