A Bank Run in a Classroom: Do Smart Depositors Withdraw on Time?

27 Pages Posted: 26 Jan 2018

See all articles by Maria Semenova

Maria Semenova

National Research University Higher School of Economics

Date Written: January 26, 2018


This paper discusses whether being smart makes depositors less prone to get involved in a panic bank run. We conduct a series of experiments with undergraduate and graduate students from Moscow and Saint-Petersburg, modelling the a-la Diamond-Dybvig deposit market with liquidity shocks, changing macroeconomic conditions and risk-based investment technologies. Our results suggest that withdrawing on time is profitable, as the average returns of depositor investments are higher, especially if the other depositors in the bank also withdraw on time. Smarter depositors – those having better academic achievements – choose the strategy of avoiding early withdrawals more frequently: each additional grade point (out of ten) adds 9 p.p. to the share of rounds where a depositor withdraws on time. This result adds to the evidence that financial literacy – even measured in a very simple way – may prevent a coordination failure in the deposit market. Our results also suggest that panic withdrawals are more probable in markets with poorer economic conditions (liquidity shocks, less profitable or less liquid investments, costly financial information), but depositors show weak sensitivity to the risks of bank investments. Depositors of medium-sized banks withdraw on time more frequently compared to those in small or large banks.

Keywords: Banks run, Experiment, Financial literacy, Academic achievements

JEL Classification: G21, G41, C91

Suggested Citation

Semenova, Maria, A Bank Run in a Classroom: Do Smart Depositors Withdraw on Time? (January 26, 2018). Higher School of Economics Research Paper No. WP BRP 64/FE/2018, Available at SSRN: https://ssrn.com/abstract=3110493 or http://dx.doi.org/10.2139/ssrn.3110493

Maria Semenova (Contact Author)

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017

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