In this paper, we study a local public good game in an endogenous network with heterogeneous agents. We consider two specifications in which different networks arise. When agents differ in the cost of acquiring the public good, active agents form hierarchical complete multipartite graphs; yet, better types need not have more neighbors. When agents' benefits from the public good are heterogeneous, nested split graphs emerge in which investment need not be monotonic in type. In large societies, few agents produce a lot and networks dampen inequality for most agents under cost heterogeneity and increase it under heterogeneity in benefits.JEL classifications: C72, D00, D85, H41. * We would like to thank

We study the Diamond-Dybvig model of financial intermediation

Delayed perfect monitoring in an infinitely repeated discounted game is modelled by allocating the players to a connected and undirected network. Players observe their immediate neighbors' behavior only, but communicate over time the repeated game's history truthfully throughout the network. The Folk Theorem extends to this setup, although for a range of discount factors strictly below 1, the set of sequential equilibria and the corresponding payoff set may be reduced. A general class of games is analyzed without imposing restrictions on the dimensionality of the payoff space. Due to this and the bilateral communication structure, truthful communication arises endogenously only under additional conditions. The model also produces a network result; namely, the level of cooperation in this setup depends on the network's diameter, and not on its clustering coefficient as in other models.

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In a Diamond-Dybvig type model of financial intermediation, we allow depositors to announce at a positive cost to subsequent depositors that they keep their funds deposited in the bank. Theoretically, the mere availability of public announcements (and not its use) ensures that no bank run is the unique equilibrium outcome. Multiple equilibria-including bank run-exist without such public announcements. We test the theoretical results in the lab and find a widespread use of announcements, which we interpret as an attempt to coordinate on the no bank run outcome. Withdrawal rates in general are lower in information sets that contain announcements.