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Who withdraws first? Line formation during bank runs

Hubert Janos Kiss, Ismael Rodriguez-Lara and Alfonso Rosa-García ()

No 20/02, ThE Papers from Department of Economic Theory and Economic History of the University of Granada.

Abstract: We study how lines form in front of banks. In our model, depositors choose first the level of effort to arrive early at the bank and then whether or not to withdraw their deposit. We argue that the informational environment (i.e. the possibility of observing the action of others) affects the emergence of bank runs and should, therefore, influence the line formation. We test it experimentally and find that the informational environment has no effect on the line formation, while expectations on the occurrence of bank runs, irrationality of depositors and their loss aversion are important factors to explain it.

Keywords: bank run; beliefs; experimental economics; line formation; loss aversion; observability. (search for similar items in EconPapers)
JEL-codes: C91 D90 G21 G40 J16 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2020-03-15
New Economics Papers: this item is included in nep-ban, nep-exp, nep-gth and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:gra:wpaper:20/02

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