Herding and bank runs

Chao Gu

Journal of Economic Theory, 2011, vol. 146, issue 1, 163-188

Abstract: Traditional models of bank runs do not allow for herding effects, because in these models withdrawal decisions are assumed to be made simultaneously. I extend the banking model to allow a depositor to choose his withdrawal time. When he withdraws depends on his consumption type (patient or impatient), his private, noisy signal about the quality of the bank's portfolio, and the withdrawal histories of the other depositors. Some of these runs are efficient in that the bank is liquidated before the portfolio worsens. Others are not efficient; these are cases in which the herd is misled.

Keywords: Bank; runs; Herding; Imperfect; information; Perfect; Bayesian; equilibrium; Optimal; bank; contract; Sequential-move; game; Fundamental-based; bank; runs (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022-0531(10)00103-1
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Herding and Bank Runs (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:146:y:2011:i:1:p:163-188

Access Statistics for this article

Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell

More articles in Journal of Economic Theory from Elsevier
Bibliographic data for series maintained by Catherine Liu ().