To Manipulate or Not to Manipulate – A Short Comment on the Game of Interest Rate Manipulation
International Journal of Economics, Finance and Management Sciences
Volume 1, Issue 1, February 2013, Pages: 21-24
Received: Dec. 11, 2012; Published: Feb. 20, 2013
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Author
Andreas Haaker, Division of Fundamental Accounting Issues, DGRV – the German Cooperative and Raiffeisen Confederation Association, Berlin; Chair of Auditing, University of Hagen , Germany
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Abstract
In this paper, bankster reputation as a coordination mechanism (“focal arbitrator”) in the game of interest rate manipulation and the effects of punishment will be analyzed with the aid of game-theoretical instruments. In such a game with multiple equilibria, the “bad” to-manipulate equilibrium arises because of “bankster expectations”. Under this condition, the game can, in the short term, only be changed through penalties so that the not-to-manipulate strategy becomes the dominant one. Should it happen that the bankster reputation be destroyed in the long term, penalties would, once again, become superfluous, because the “good” not-to-manipulate equilibrium would appear even in self-interested actions, due to the good banker expectations.
Keywords
LIBOR, Interest Rate Manipulation, Game Theory, Focal Point, Banksters
To cite this article
Andreas Haaker, To Manipulate or Not to Manipulate – A Short Comment on the Game of Interest Rate Manipulation, International Journal of Economics, Finance and Management Sciences. Vol. 1, No. 1, 2013, pp. 21-24. doi: 10.11648/j.ijefm.20130101.13
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