The Finance Brown Bag Seminar is held by the Institute for Finance, Banking and Insurance (WU Vienna) and the Vienna Graduate School of Finance (VGSF). It serves as a presentation platform for PhD students, faculty members, and visitors. An overview of BBS on the website of the Institute for Finance, Banking and Insurance.
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Tomy Lee, CEU
Public Goods in Crises
joint with Chaojun Wang (University of Pennsylvania, The Wharton School)
We introduce nonrival public goods into global games of regime change and rationalize investor behavior in the Euro crisis, the collapse of Terra, and the 2023 bank runs. Each investor in a large project is vanishingly unlikely to be pivotal for its survival. She also benefits from the project’s enormous public goods. In equilibrium, this large benefit precisely counterbalances her vanishing pivotal likelihood, such that even an atomistic and selfish investor internalizes her marginal impact on project survival. In an economy of firms, any divestment yields financial gains whenever it positively assorts projects’ public goods with investors’ sensitivities to those goods. Yet such divestments can harm the social surplus.
