A note on convergence of Peck-Shell and Green-Lin mechanisms in the Diamond-Dybvig model
We study the e¤ects of population size in the Peck-Shell analysis of bank runs. We nd that a contract featuring equal-treatment for al- most all depositors of the same type approximates the optimum. Because the approximation also satis es Green-Lin incentive constraints, when the planner discloses positions in the queue, welfare in these alternative spec- i cations are sandwiched. Disclosure, however, is not needed since our approximating contract is not subject to runs. keywords: bank fragility, role of population size, role of aggregate uncer- tainty
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- Diamond, Douglas W & Dybvig, Philip H, 1983.
"Bank Runs, Deposit Insurance, and Liquidity,"
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01-10r, Cornell University, Center for Analytic Economics.
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- David Andolfatto & Ed Nosal & Neil Wallace, 2006. "The role of independence in the Green-Lin Diamond-Dybvig model," Working Paper 0615, Federal Reserve Bank of Cleveland.
- Cavalcanti, Ricardo & Monteiro, Paulo Klinger, 2011. "Enriching Information to Prevent Bank Runs," Economics Working Papers (Ensaios Economicos da EPGE) 721, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Karl Shell & James Peck, 2004.
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359, Society for Economic Dynamics.
- James Peck & Karl Shell, 2003. "Bank Portfolio Restrictions and Equilibrium Bank Runs," Levine's Bibliography 666156000000000077, UCLA Department of Economics.
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