The Role of Independence in the Green-Lin Diamond-Dybvig Model

13 Pages Posted: 19 Oct 2007

See all articles by David Andolfatto

David Andolfatto

Simon Fraser University (SFU) - Department of Economics; Federal Reserve Bank of St. Louis

Ed Nosal

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Neil Wallace

Pennsylvania State University, College of the Liberal Arts - Department of Economic

Date Written: November 2006

Abstract

Green and Lin study a version of the Diamond-Dybvig model with a finite number of agents, independence (independent determination of each agent's type), and sequential service. For special preferences, they show that the ex ante first-best allocation is the unique equilibrium outcome of the model with private information about types. Via a simple argument, it is shown that uniqueness of the truth-telling equilibrium holds for general preferences, and, in particular, for a constrained-efficient allocation whether first-best or not. The crucial assumption is independence.

Keywords: bank run, implementation

JEL Classification: D82, G21

Suggested Citation

Andolfatto, David and Nosal, Ed and Wallace, Neil, The Role of Independence in the Green-Lin Diamond-Dybvig Model (November 2006). FRB of Cleveland Working Paper No. 06-15. Available at SSRN: https://ssrn.com/abstract=1022182 or http://dx.doi.org/10.2139/ssrn.1022182

David Andolfatto

Simon Fraser University (SFU) - Department of Economics ( email )

8888 University Drive
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604 291-5825 (Phone)
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Federal Reserve Bank of St. Louis ( email )

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Ed Nosal (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Neil Wallace

Pennsylvania State University, College of the Liberal Arts - Department of Economic ( email )

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University Park, PA 16802-3306
United States
814-863-3805 (Phone)
814-863-4775 (Fax)

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