Financial Literacy and Bank Runs: An Experimental Analysis

36 Pages Posted: 20 Apr 2017 Last revised: 8 Jul 2017

See all articles by Eloisa Campioni

Eloisa Campioni

University of Rome Tor Vergata - Dept. of Economics and Finance

Vittorio Larocca

Luiss Guido Carli University

Loredana Mirra

University of Rome, Tor Vergata

Luca Panaccione

University of Rome Tor Vergata

Date Written: July 4, 2017

Abstract

We set up an experimental coordination game among bank depositors à la Diamond and Dybvig (1983). We elicit subjects’ financial literacy and study the impact of revealing this information on the coordination problem typical of this game with multiple equilibria. We find that when no information is revealed the likelihood of runs increases with bank size, while when information on financial literacy is disclosed it increases in small banks and decreases in large ones. Over all banks’ dimensions, the probability of coordinating on the inefficient equilibrium is lower when the average financial literacy revealed to the group is higher.

Keywords: Bank Run, Laboratory Experiment, Financial Literacy, Coordination Game

JEL Classification: C92, C72, D80, G21

Suggested Citation

Campioni, Eloisa and Larocca, Vittorio and Mirra, Loredana and Panaccione, Luca, Financial Literacy and Bank Runs: An Experimental Analysis (July 4, 2017). CEIS Working Paper No. 402, Available at SSRN: https://ssrn.com/abstract=2955813 or http://dx.doi.org/10.2139/ssrn.2955813

Eloisa Campioni

University of Rome Tor Vergata - Dept. of Economics and Finance ( email )

Italy

Vittorio Larocca

Luiss Guido Carli University ( email )

Rome
Italy

Loredana Mirra

University of Rome, Tor Vergata ( email )

Via di Tor Vergata
Rome, Lazio 00133
Italy

Luca Panaccione (Contact Author)

University of Rome Tor Vergata ( email )

via Columbia 2
Rome, IA Rome 00133
Italy

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