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The role of independence in the Green-Lin Diamond-Dybvig model

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  • Andolfatto, David
  • Nosal, Ed
  • Wallace, Neil

Abstract

Green and Lin study a version of the Diamond-Dybvig model with a finite number of agents, independence (independent determination of each agent?s type), and sequential service. For special preferences, they show that the ex ante first-best allocation is the unique equilibrium outcome of the model with private information about types. Via a simple argument, it is shown that uniqueness of the truth-telling equilibrium holds for general preferences, and, in particular, for a constrained-efficient allocation whether first-best or not. The crucial assumption is independence.
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Suggested Citation

  • Andolfatto, David & Nosal, Ed & Wallace, Neil, 2007. "The role of independence in the Green-Lin Diamond-Dybvig model," Journal of Economic Theory, Elsevier, vol. 137(1), pages 709-715, November.
    • Handle: RePEc:eee:jetheo:v:137:y:2007:i:1:p:709-715
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