The Research On Multiple Equilibria And Moral Hazard

The study on multiple equilibria was started two decades ago. So the research on multiple equilibria in finance crisis is a very new area.In this paper, it is started with an explanation about the definition on money crisis and finance crisis, and also with an introduction on the development and background of three kinds of models. After that, followed by two classic examples on the first kind and second kind model, also an explanation of the two models. And then, based on multiple equilibria model, the solution of the model is worked out with an analysis on the solution. Further more, based on the model, the paper added bank system to complicate the system of government decision. What is more, after combining the bank system, the paper consider about the coming problem on the risk of Moral Hazard, the make model of it. Finally, making use of Deposit Insurance and static Nash games to control and depress the risk. In this paper, we combine the government decision system ,bank investment system with the unobvious speculator investment system in moral hazard model. When the moral hazard exsits,The government has to consider not only the speculator system ,but also the risk of bankruptcy coursed by the bank investment system. This moral hazard is because that the bank knows surely that once it gets in bankruptcy, the government will spend the saving to help it out of the situation. In that case, the bank may pursuit for the high risk investment deliberately for possibility of high profits. When one bank drop into a bankruptcy situation, for the steady of whole national finance system, the government have to pay for the loss of the bank to avoid the further catastrophe. One way, the government have to cost the deposit ,on the other side ,the moral hazard change the expectation to the speculator,Incease the possibility that the speculators choose to speculate. For decrease or dispel the moral hazard, we use deposit insurance and game theory to deal with it. We have to admit that both ways have its disadvantage. So to get use two ways, and supervise from more aspects, we may decrease or dispel the moral hazard.