More Like this

1. Bail-ins and Bailouts: Incentives, Connectivity, and Systemic Stability

   Agostino Capponi, Benjamin Bernard (January 2022, The journal of political economy)

   Harald Uhlig (Ed.)

   This paper endogenizes intervention in financial crises as the strategic negotiation between a regulator and creditors of distressed banks. Incentives for banks to contribute to a voluntary bail-in arise from their exposure to financial contagion. In equilibrium, a bail-in is possible only if the regulator's threat to not bail out insolvent banks is credible. Contrary to models without intervention or with government bailouts only, sparse networks enhance welfare for two main reasons: they improve the credibility of the regulator's no-bailout threat for large shocks and they reduce free-riding incentives among bail-in contributors when the threat is credible 

   more » « less
2. Credit Freezes, Equilibrium Multiplicity, and Optimal Bailouts in Financial Networks

   https://doi.org/10.1093/rfs/hhad096  

   Jackson, Matthew O; Pernoud, Agathe (January 2024, The Review of Financial Studies)

   Abstract We analyze how interdependencies in financial networks can lead to self-fulfilling insolvencies and multiple possible equilibrium outcomes. Multiplicity arises if a certain type of dependency cycle exists in the network. We show that finding the cheapest bailout policy that prevents self-fulfilling insolvencies is computationally hard, but that the optimal policy has intuitive features in some typical network structures. Leveraging indirect benefits ensures systemic solvency at a cost that never exceeds half of the overall shortfall. In core-periphery networks, it is optimal to bail out peripheral banks first as opposed to core banks. 

   more » « less
3. The Role of Professional Product Reviewers in Evaluating Security and Privacy

   Guo, Wentao; Walter, Jason; Mazurek, Michelle L (August 2023, USENIX)

   Consumers who use Internet-connected products are often exposed to security and privacy vulnerabilities that they lack time or expertise to evaluate themselves. Can professional product reviewers help by evaluating security and privacy on their behalf? We conducted 17 interviews with product reviewers about their procedures, incentives, and assumptions regarding security and privacy. We find that reviewers have some incentives to evaluate security and privacy, but they also face substantial disincentives and challenges, leading them to consider a limited set of relevant criteria and threat models. We recommend future work to help product reviewers provide useful advice to consumers in ways that align with reviewers' business models and incentives. These include developing usable resources and tools, as well as validating the heuristics they use to judge security and privacy expediently. 

   more » « less
4. A path forward: improving Internet routing security by enabling zones of trust

   https://doi.org/10.1093/cybsec/tyae023  

   Clark, David; Testart, Cecilia; Luckie, Matthew; claffy, kc (December 2024, Journal of Cybersecurity)

   Abstract Although Internet routing security best practices have recently seen auspicious increases in uptake, Internet Service Providers (ISPs) have limited incentives to deploy them. They are operationally complex and expensive to implement and provide little competitive advantage. The practices with significant uptake protect only against origin hijacks, leaving unresolved the more general threat of path hijacks. We propose a new approach to improved routing security that achieves four design goals: improved incentive alignment to implement best practices; protection against path hijacks; expanded scope of such protection to customers of those engaged in the practices; and reliance on existing capabilities rather than needing complex new software in every participating router. Our proposal leverages an existing coherent core of interconnected ISPs to create a zone of trust, a topological region that protects not only all networks in the region, but all directly attached customers of those networks. Customers benefit from choosing ISPs committed to the practices, and ISPs thus benefit from committing to the practices. We discuss the concept of a zone of trust as a new, more pragmatic approach to security that improves security in a region of the Internet, as opposed to striving for global deployment. We argue that the aspiration for global deployment is unrealistic, since the global Internet includes malicious actors. We compare our approach to other schemes and discuss how a related proposal, ASPA, could be used to increase the scope of protection our scheme achieves. We hope this proposal inspires discussion of how the industry can make practical, measurable progress against the threat of route hijacks in the short term by leveraging institutionalized cooperation rooted in transparency and accountability. 

   more » « less
5. International Climate Agreements under the Threat of Solar Geoengineering

   https://doi.org/10.1086/728140  

   McEvoy, David M; McGinty, Matthew; Cherry, Todd L; Kroll, Stephan (July 2024, Journal of the Association of Environmental and Resource Economists)

   The possibility of overshooting global emissions targets has triggered a de-bate about the role of solar geoengineering (SGE)—using technologies to reflect solar radiation away from Earth—in managing climate change. One major concern is thatSGE technologies are relatively cheap and could potentially be deployed by a single country (the “free driver”). We develop a model to analyze how opportunities to de-ploy SGE impact global abatement and the effectiveness of international environ-mental agreements (IEAs). We show that noncooperative abatement may increase or decrease under the threat of SGE, depending on how damaging the free driver’s level of deployment is to others. When free-driver externalities are significant, other countries have additional incentives to abate—called anti-driver incentives—to reduce the free driver’s deployment. We also show that compared to a world withoutSGE opportunities, stable IEAs can be large (small) if anti-driver incentives are relatively strong (weak). 

   more » « less