A note on convergence of Peck-Shell and Green-Lin mechanisms in the Diamond-Dybvig model
We study the effects of population size in the Peck-Shell analysis of bank runs. We find that a contract featuring equal-treatment for almost all depositors of the same type approximates the optimum. Because the approximation also satisfies Green-Lin incentive constraints, when the planner discloses positions in the queue, welfare in these alternative specifications are sandwiched. Disclosure, however, it is not needed since our approximating contract is not subject to runs.
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- Andolfatto, David & Nosal, Ed & Wallace, Neil, 2007.
"The role of independence in the Green-Lin Diamond-Dybvig model,"
Journal of Economic Theory,
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- James Peck & Karl Shell, 2003. "Bank Portfolio Restrictions and Equilibrium Bank Runs," Levine's Bibliography 666156000000000077, UCLA Department of Economics.
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- James Peck & Karl Shell, 2003. "Equilibrium Bank Runs," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 103-123, February.
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