Would depositors pay to show that they do not withdraw? Theory and experiment

Markus Kinateder, Hubert Janos Kiss and Ágnes Pintér

Experimental Economics, 2020, vol. 23, issue 3, No 11, 873-894

Abstract: Abstract In a Diamond–Dybvig type model of financial intermediation, we allow depositors to announce at a positive cost to subsequent depositors that they keep their funds deposited in the bank. Theoretically, the mere availability of public announcements (and not its use) ensures that no bank run is the unique equilibrium outcome. Multiple equilibria—including bank run—exist without such public announcements. We test the theoretical results in the lab and find a widespread use of announcements, which we interpret as an attempt to coordinate on the no bank run outcome. Withdrawal rates in general are lower in information sets that contain announcements.

Keywords: Asymmetric information; Bank runs; Experimental evidence; Public information (search for similar items in EconPapers)
JEL-codes: C72 C91 D80 G21 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (7)

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DOI: 10.1007/s10683-020-09646-y

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