Gabriele Camera

The future architecture of financial systems is a subject of contention, with centralized and decentralized governance proponents. Here, we ask the following question. Would the architecture affect the quality of decision making? We propose a game where financial network participants demarcate the ownership of claims to income. This governance task can be decentralized (shared authority), centralized (single authority), or hybrid (alternating authority). Without communication, all architectures supported poor outcomes. With communication, decentralization ensured good governance and maximum profits, whereas centralization did not—lowering communication’s potency in promoting socially optimal decisions. This indicates that there is scope for decentralization in innovating financial institutions. This paper has been accepted by Camelia Kuhnen for the Virtual Special Issue on Digital Finance. Funding: N. Chemaya acknowledges partial financial support from the NET Institute. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2025.02314 .

Cooperation does not empirically scale when strangers confront indefinitely repeated social dilemmas—despite its incentive-compatibility. Here, we investigate if an intervention can mitigate this problem: expanding the action set with partial cooperation choices. Although standard theory predicts no effect, adding interior choices to a rigid binary-choice game often boosted cooperation and efficiency in the laboratory. Under some conditions, groups of strangers achieved outcomes close to those observed in pairs of partners—where adding interior choices, instead, was inconsequential. This suggests that choice rigidities can hinder long-run cooperation.

Historically, shocks originating in the financial sector often spilled over into the real sector with dramatic consequences. We study in the lab how interventions targeting disclosure and capital requirements of financial intermediaries can reduce insolvencies or prevent their negative effects from propagating to the broader economy. In our two-sector economy, consumers and producers can fund financial intermediaries, who, in turn, provide them with liquidity to settle trades. However, intermediaries may undertake risky investments and become insolvent, which depresses real economic activity. In the experiment, insolvencies were frequent. As a consequence, consumers and producers often refused to fund intermediaries, which lowered the trade volume. Imposing the disclosure of risky investments did not reduce risk-taking and insolvencies. Instead, imposing capital requirements prevented insolvencies from disrupting real economic activity, thus boosting financial intermediation and trade.

International economic theory suggests that people should embrace economic integration because it promises large gains. But policy reversals such as Brexit indicate a desire for economic disintegration. Here we report results of an experiment of how size and cross-country distribution of gains from integration influence individuals’ inclination to cooperate to reap its intended benefits and to embrace or reject integration. The design considers an indefinitely repeated helping game with multiple equilibria and strategic uncertainty. The data reveal that inequality of potential gains neither affected behavior nor reduced support for economic integration. However, integration may lead to disappointing, unequally distributed welfare gains, undermining support for the policy. This suggests that to better assess integration policies, we should account for the spillover effects of integration on behavior. Miscalculating this behavioral aspect may undermine the intended development goals and motivate calls for dramatic policy-reversals.