Optimal Fragile Financial Networks

Fabio Castiglionesi
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Fabio Castiglionesi: CentER and Tilburg University.

No 658, 2008 Meeting Papers from Society for Economic Dynamics

Abstract: the structure of the decentralized financial network is equal to the efficient one, yielding an expected payoff arbitrarily close to the efficient one. However, the investment decision is not the same. That is, in the decentralized network some banks will gamble as compared to the socially preferred outcome.

Date: 2008
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