On Run-preventing Contract Design

Ohashi Yoshihiro ()
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Ohashi Yoshihiro: Center for Finance Research, Waseda University, 1-4-1, Nihonbashi, Chuo-ku, Tokyo, Japan

The B.E. Journal of Theoretical Economics, 2015, vol. 15, issue 1, 63-72

Abstract: This study considers how to implement an efficient allocation of a financial intermediation model, including liquidation costs. The main result shows that there is a mechanism such that, for any liquidation cost, an efficient allocation is implementable in strictly dominant strategies. There is no need for third-party assistance, such as deposit insurance. In addition, the mechanism is tolerant of a small, unexpected shock caused by premature withdrawals.

Keywords: deposit contracts; bank runs; mechanism design; strategy-proof; implementation (search for similar items in EconPapers)
JEL-codes: D82 G21 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1515/bejte-2014-0007

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