Evolution, Coordination, and Banking Panics

Ted Temzelides ()

Finance from EconWPA

Abstract: I study equilibrium selection by an evolutionary process in an environment with multiple equilibria, one of which involves a banking panic. The analysis is built on a repeated version of the Diamod-Dybvig (1983) model. The optimal (run free) equilibrium is uniquely selected if it is also "risk dominant." Furthermore, the probability of observing a panic increases as the size of the banks decreases. I discuss local interaction and contagion effects that allow for a bankrun to spread first among banks in the same geographic location and then throughout the entire population.

JEL-codes: C7 D8 G (search for similar items in EconPapers)
Date: 1995-11-22
Note: 26 pages, TEX(SWP) file
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Related works:
Working Paper: Evolution, coordination, and banking panics (1995)
Journal Article: Evolution, coordination, and banking panics (1997)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:9511002

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