Essays on microeconomics

Official URL: https://risc01.sabanciuniv.edu/record=b2578893 _(Table of contents,9

This thesis analyzes bargaining situations via cost allocation methods pertaining to rescue in an interbank market where there exists contagious financial distress. Our results extend the rescuing structure of Rogers and Veraart (2013) into a bargaining perspective. We consider different cost allocation methods which can be used to save the defaulting banks and to stop the contagious effect of the bank failure. We show that under proportional cost allocation, the solvent banks who have strictly positive income will always save the defaulting bank under mild conditions. On the other hand, we show that rescuing formation might not work under some other cost allocation methods