Bank Runs: An Experimental Study
We use experimental methods to investigate the extent to which breakdowns in coordination can lead to bank runs. Subjects decide whether to leave money deposited in a bank or withdraw it early; a run occurs when there are too many early withdrawals. We explore the effects of randomly forcing some subjects to withdraw early and varying the number of opportunities subjects have to withdraw. Bank runs occur frequently with forced withdrawals, even if these withdrawals are unlikely to cause the bank to fail. Exposure to bank runs has a much larger effect on future withdrawal behavior when there are multiple withdrawal opportunities than with a single opportunity. We also evaluate individual withdrawal decisions according to simple cutoff rules. We find that the cutoff rule corresponding to the payoff-dominant equilibrium of the game, which involves Bayesian updating of probabilities, explains subject behavior better than other rules.
|Date of creation:||03 Aug 2005|
|Contact details of provider:|| Postal: 2127 North Hall, Santa Barbara, CA 93106-9210|
Phone: (805) 893-3670
Fax: (805) 893-8830
Web page: http://www.escholarship.org/repec/ucsbecon_dwp/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:cdl:ucsbec:qt1rk2w7m4. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.