Public and private guarantee funds with market fragility

Russell Cooper, Thomas W. Ross

Research output: Contribution to journalArticlepeer-review

8 Scopus citations


When buyers worry that sellers may not remain in the market long enough to fulfill all contractual obligations, they may be unwilling to purchase and a market failure can result. Bank deposits and pension benefits are examples of contracts for which buyers might lose confidence in sellers, making these markets "fragile." This paper studies market fragility created by both fundamental (i.e., costs and demand) and strategic uncertainty (i.e., beliefs). We find a rich interaction between these two sources of uncertainty. The paper also considers the role and design of guarantee funds - some public, some private - created to support trade in many potentially fragile markets.

Original languageEnglish (US)
Pages (from-to)163-184
Number of pages22
JournalJournal of Risk and Insurance
Issue number2
StatePublished - Jun 1999

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


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