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Strategic uncertainty and the power of extrinsic signals– evidence from an experimental study of bank runs


  • Arifovic, Jasmina
  • Jiang, Janet Hua


We investigate how the level of strategic uncertainty affects the coordination power of publicly observed extrinsic signals in a controlled laboratory environment in the context of a bank-run game. We run three treatments featuring different levels of strategic uncertainty. Although theory predicts that an equilibrium where agents’ choices and economic outcomes follow the realization of the extrinsic signal exists in all treatments, strong responses to the extrinsic signal occur only in the treatment where strategic uncertainty is high.

Suggested Citation

  • Arifovic, Jasmina & Jiang, Janet Hua, 2019. "Strategic uncertainty and the power of extrinsic signals– evidence from an experimental study of bank runs," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 1-17.
  • Handle: RePEc:eee:jeborg:v:167:y:2019:i:c:p:1-17
    DOI: 10.1016/j.jebo.2019.06.023

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    Cited by:

    1. Pietro Battiston & Sharon G. Harrison, 2019. "Believe it or not: Experimental Evidence on Sunspot Equilibria with Social Networks," Working Papers 422, University of Milano-Bicocca, Department of Economics, revised Nov 2019.

    More about this item


    Bank runs; Extrinsic signals; Sunspots; Experiment; Financial crises; Strategic uncertainty;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G20 - Financial Economics - - Financial Institutions and Services - - - General


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