Implementing the efficient allocation in a model of financial intermediation

Edward Green () and Ping Lin
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Ping Lin: Southern Methodist University

Finance from EconWPA

Abstract: In a finite-trader version of the Diamond-Dybvig (1983) model, the symmetric, ex-ante efficient allocation is implementable by a direct mechanism (i.e., each trader announces the type of his own ex-post preference) in which truthful revelation is the strictly dominant strategy for each trader. When the model is modified by formalizing the sequential-service constraint (cf.~Wallace, 1988), the truth-telling equilibrium implements the symmetric, ex-ante efficient allocation with respect to iterated elimination of strictly dominated strategies.

JEL-codes: E44 G21 (search for similar items in EconPapers)
Date: 1996-10-31, Revised 1996-10-31
Note: LaTeX file. 22 pages. Ignore "over/underfull hbox" messages during processing.
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:9610006

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