The role of independence in the Green-Lin Diamond-Dybvig model
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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- Green, Edward J. & Lin, Ping, 2003.
"Implementing efficient allocations in a model of financial intermediation,"
Journal of Economic Theory,
Elsevier, vol. 109(1), pages 1-23, March.
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- Abreu, Dilip & Sen, Arunava, 1991. "Virtual Implementation in Nash Equilibrium," Econometrica, Econometric Society, vol. 59(4), pages 997-1021, July.
- 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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