Coordination and Information Design

The proposed research aims at studying persuasion in markets in which a large number of small agents (e.g., the creditors of a financial institution) must choose whether or not to coordinate on a socially-desirable action (e.g., whether to pull their money out from a financial institution, or rollover their loans). Agents are endowed with heterogeneous private information about the underlying fundamentals (e.g., about the critical size of attack above which the status quo collapses). A cash-constrained policy maker (e.g., a government) can act on the agents’ information (for example, by designing a stress test), but does not possess any other instrument to influence the market coordination outcome.