Uncertainty Averse Bank Runners
Bank runs are relatively rare events characterized by highly pessimistic depositor’s expectations. How would pessimistic depositors expect to be treated in a bank run? How will this affect their behaviour? How can Banks handle this kind of risk? In the framework of a Diamond-Dybvig- Peck-Shell banking model, in which a broad class of feasible contractual arrangements (including .suspension schemes.) is allowed and which admits a run equilibrium, we analyze a scenario in which depositors are uncertain of their treatment should a run occur. We check whether bank runs are more likely or less likely to happen, in particular, if depositors are maxmin decision makers. We assess the utility of suspension schemes in the presence of pessimistic bank runners.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 0141 330 4618
Fax: 0141 330 4940
Web page: http://www.gla.ac.uk/schools/business/research/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Douglas W. Diamond & Philip H. Dybvig, 2000.
"Bank runs, deposit insurance, and liquidity,"
Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
- Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
- Daniel Ellsberg, 2000. "Risk, Ambiguity and the Savage Axioms," Levine's Working Paper Archive 7605, David K. Levine.
- James Peck & Karl Shell, 2003.
"Equilibrium Bank Runs,"
Journal of Political Economy,
University of Chicago Press, vol. 111(1), pages 103-123, February.
- Edward J. Green & Ping Lin, 2000. "Diamond and Dybvig's classic theory of financial intermediation : what's missing?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 3-13.
When requesting a correction, please mention this item's handle: RePEc:gla:glaewp:2008_03. 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: (Jeanette Findlay)
If references are entirely missing, you can add them using this form.