Sequential Decisions in the Diamond-Dybvig Banking Model

41 Pages Posted: 31 Oct 2013

See all articles by Markus Kinateder

Markus Kinateder

Universidad de Navarra

Hubert Janos Kiss

Eötvös Loránd University; Hungarian Academy of Sciences (HAS) - Institute of Economics CERS-HAS (IEHAS)

Date Written: October 24, 2013

Abstract

We study the Diamond-Dybvig model of fi nancial intermediation (JPE, 1983) under the assumption that depositors have information about previous decisions. Depositors decide sequentially whether to withdraw their funds or continue holding them in the bank. If depositors observe the history of all previous decisions, we show that there are no bank runs in equilibrium independently of whether the realized type vector selected by nature is of perfect or imperfect information.

Keywords: Bank Run, Imperfect Information, Perfect Bayesian Equilibrium

JEL Classification: C72, D82, G21

Suggested Citation

Kinateder, Markus and Kiss, Hubert Janos, Sequential Decisions in the Diamond-Dybvig Banking Model (October 24, 2013). Available at SSRN: https://ssrn.com/abstract=2346870 or http://dx.doi.org/10.2139/ssrn.2346870

Markus Kinateder

Universidad de Navarra ( email )

Camino del Cerro del Aguila, 3
Pamplona, Navarra 31080
Spain

Hubert Janos Kiss (Contact Author)

Eötvös Loránd University ( email )

Pazmany Peter setany 1A
Budapest, -- H1117
Hungary

Hungarian Academy of Sciences (HAS) - Institute of Economics CERS-HAS (IEHAS) ( email )

Budaorsi ut 45
Budapest, 1112
Hungary

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