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Teaching Bank Runs with Classroom Experiments

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  • Balkenborg, Dieter
  • Kaplan, Todd R.
  • Miller, Tim

Abstract

Once relegated to cinema or history lectures, bank runs have become a modern phenomenon that captures the interest of students. We use a simple classroom experiment based upon the Diamond-Dybvig Model (1983) to demonstrate how a bank run, a seemingly irrational event, can occur rationally. We then present possible topics for discussion including various ways to prevent bank runs and moral hazard.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18635.

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Date of creation: 12 Jan 2009
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Handle: RePEc:pra:mprapa:18635

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Keywords: bank runs; multiple equilibria;

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  1. Todd R. Kaplan, . "Why Banks Should Keep Secrets," Working papers _005, University of Minnesota, Department of Economics.
  2. Shy Oz & Stenbacka Rune, 2008. "Rethinking the Roles of Banks: A Call for Narrow Banking," The Economists' Voice, De Gruyter, vol. 5(2), pages 1-4, June.
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Cited by:
  1. Jonathan E. Alevy & Paul Ronald Johnson, 2013. "A Classroom Financal Market Experiment," Working Papers 2013-01, University of Alaska Anchorage, Department of Economics.
  2. Todd R. Kaplan & Dieter Balkenborg, 2010. "Using Economic Classroom Experiments," International Review of Economic Education, Economics Network, University of Bristol, vol. 9(2), pages 99-106.
  3. Surajeet Chakravarty & Miguel A. Fonseca & Todd Kaplan, 2012. "An Experiment on the Causes of Bank Run Contagions," Discussion Papers 1206, Exeter University, Department of Economics.

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