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In response to a change, individuals may choose to follow the responses of their friends or, alternatively, to change their friends. To model these decisions, consider a game where players choose their behaviors and friendships. In equilibrium, players internalize the need for consensus in forming friendships and choose their optimal strategies on subsets of k players - a form of bounded rationality. The k-player consensual dynamic delivers a probabilistic ranking of a game's equilibria, and, via a varying k, facilitates estimation of such games. Applying the model to adolescents' smoking suggests that: (a.) the response of the friendship network to changes in tobacco price amplifies the intended effect of price changes on smoking, (b.) racial desegregation of high-schools decreases the overall smoking prevalence, (c.) peer effect complementarities are substantially stronger between smokers compared to between non-smokers. (d.) the magnitude of the spillover effects from small scale policies targeting individuals' smoking choices are roughly double compared to the scale of these policies., Comment: arXiv admin note: substantial text overlap with arXiv:1705.03137

In games of friendship links and behaviors, I propose $k$-player Nash stability---a family of equilibria, indexed by a measure of robustness given by the number of permitted link changes, which is (ordinally and cardinally) ranked in a probabilistic sense. Application of the proposed framework to adolescents' tobacco smoking and friendship decisions suggests that: (a.) friendship networks respond to increases of tobacco prices and this response amplifies the intended policy effect on smoking, (b.) racially desegregating high-schools, via stimulating the social interactions of students with different intrinsic propensity to smoke, decreases the overall smoking prevalence, (c.) adolescents are averse to sharing friends so that there is a rivalry for friendships, (d.) when data on individuals' friendship network is not available, the importance of price centered policy tools is underestimated.

The emerging world of decentralized finance (DeFi), facilitated by smart contracts operating on blockchain networks, has been notable both for its rapid growth and the high-profile collapses of several of its largest participants. In this paper, we provide a technical account of the financial mechanisms which facilitated the growth and eventual collapse of the Terra Network. From this analysis, we outline a generalizable economic theory of blockchains which aims to differentiate the economics of blockchains as programmable environments from blockchains as accounting ledgers for crypto-assets. This adds to the existing literature on crypto-assets, which largely focuses on the financial characteristics of the crypto-assets themselves rather than their underlying blockchains. We argue that DeFi is structured so as to offer consumers distinct blockchain networks as competing choices differentiated by several key characteristics. We test several implications of this theory using Terra's collapse as a natural experiment, finding evidence that bridges between programmable blockchain networks create increased risk of spillover effects to other blockchains' programmable environments in the wake of a major shock event like Terra's collapse. Specifically, blockchains suffered a time-bound loss of market share and the likelihood of this loss grew approximately 40% for each additional bridge that was deployed in common with Terra at the time of Terra's collapse. [ABSTRACT FROM AUTHOR]

We analyze the universe of payments settled through the Fedwire Funds Service--the primary U.S. real-time gross settlement service operated by the Federal Reserve--for the period January 2004 to December 2020. We report on trends in payments volume, payments value, balances, and overdrafts, in addition to documenting changes in the behavior of financial institutions transacting via the Fedwire Funds Service. [ABSTRACT FROM AUTHOR]

The article discusses the rise of distributed ledger technology (DLT), an innovation in fintech, which has been used as a means of transforming payment, clearing and settlement (PCS) processes such as the transfer of funds and settlement of securities. DLT is noted to improve the end-to-end settlement speed, data auditability and cost efficiency of industry participants. The use of cryptography in facilitating PCS processes is also mentioned.

The article offers information on the basic bitcoin operations and the regularities about the use of bitcoins. It discusses the micro-structure of the transaction process of bitcoins and the complicated dynamics of bitcoin exchange rates. It also examines the use of cryptography to secure the transaction of a ledger.