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Born to Run: Adaptive and Strategic Behavior in Experimental Bank-Run Games

Federico Belotti (), Eloisa Campioni (), Vittorio Larocca (), Francesca Marazzi (), Luca Panaccione () and Andrea Piano Mortari ()
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Vittorio Larocca: Luiss Guido Carli
Luca Panaccione: University of Rome "La Sapienza"

No 529, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: We run a laboratory experiment to investigate how the size of the group affects coordination in a bank-run game played repeatedly by participants facing different fellow depositors. For comparability purposes, we keep the coordination tightness constant across different sizes. Participants exhibit an adaptive behavior, since the main drivers of their decisions to withdraw are: previous-round outcomes and own initial choice. Moreover, they mainly adopt the best response to previous-round feedback. However, a sizeable share of participants adopts the opposite mode of behavior, that we refer to as experimentation. The analysis of the determinants of experimentation suggest that subjects adopt this behavior when the probability to lead the group toward the efficient outcome is higher. Finally, our analysis shows that the size of the bank has a significant effect on participants’ decisions, since they withdraw more and experiment less in large banks.

Keywords: Coordination Games; Experimental Studies; Bank Runs (search for similar items in EconPapers)
JEL-codes: C70 C92 D80 G21 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2021-12-13, Revised 2021-12-13
New Economics Papers: this item is included in nep-ban, nep-exp and nep-gth
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