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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- Douglas W. Diamond & Philip H. Dybvig, 2000.
"Bank runs, deposit insurance, and liquidity,"
Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
- Andolfatto, David & Nosal, Ed & Wallace, Neil, 2007.
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- James Peck & Karl Shell, 2003.
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666156000000000077, UCLA Department of Economics.
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Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(3), pages 477-494, August.
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- Peck, James & Shell, Karl, 2001.
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01-10r, Cornell University, Center for Analytic Economics.
- Ennis, Huberto M. & Keister, Todd, 2009. "Run equilibria in the Green-Lin model of financial intermediation," Journal of Economic Theory, Elsevier, vol. 144(5), pages 1996-2020, September.
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