A Behavioral Model of Demandable Deposits and its Implications for Financial Regulation
A model is developed which rationalizes contracts that give depositors the right to obtain funds on demand even when depositors intend to use these funds for consumption in the future. This is explained by depositor overoptimism regarding their own ability to collect funds in a run. Capitalized institutions serving depositors with such beliefs emerge in equilibrium even if depositors and bank owners have the same preferences and the same investment opportunities. Various government regulations of these institutions, including minimum capital levels, requirements concerning the assets they may hold, deposit insurance and compulsory clawbacks in bankruptcy can raise the average ex post welfare of depositors.
|Date of creation:||Dec 2010|
|Date of revision:|
|Note:||CF EFG ME|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
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.:
- Frey, Bruno S. & Pommerehne, Werner W., 1993. "On the fairness of pricing -- An empirical survey among the general population," Journal of Economic Behavior & Organization, Elsevier, vol. 20(3), pages 295-307, April.
- Rotemberg, Julio J., 2008.
"Minimally acceptable altruism and the ultimatum game,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 66(3-4), pages 457-476, June.
- Julio J. Rotemberg, 2006. "Minimally acceptable altruism and the ultimatum game," Working Papers 06-12, Federal Reserve Bank of Boston.
- Augustin Landier & David Thesmar, 2009. "Financial Contracting with Optimistic Entrepreneurs," Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 117-150, January.
- Muhamet Yildiz, 2003. "Bargaining without a Common Prior-An Immediate Agreement Theorem," Econometrica, Econometric Society, vol. 71(3), pages 793-811, 05.
- Itzhak Ben-David & John R. Graham & Campbell R. Harvey, 2010.
NBER Working Papers
16215, National Bureau of Economic Research, Inc.
- Nicola Gennaioli & Andrei Shleifer & Robert Vishny, 2010.
"Financial Innovation and Financial Fragility,"
2010.114, Fondazione Eni Enrico Mattei.
- Francesco Squintani & Alvaro Sandroni, 2007.
"Overconfidence, Insurance and Paternalism,"
Economics Discussion Papers
643, University of Essex, Department of Economics.
- Hasan, Iftekhar & Dwyer, Gerald P, Jr, 1994. "Bank Runs in the Free Banking Period," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(2), pages 271-88, May.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:16620. 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: ()
If references are entirely missing, you can add them using this form.