Uncertainty Averse Bank Runners

Cozzi, Guido and Giordani, Paolo E. (2008) Uncertainty Averse Bank Runners. [Working Paper]. p. 16. Working Papers (No. 2008_03). (Submitted)

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Official URL: http://www.gla.ac.uk/media/media_66818_en.pdf

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Abstract/Index

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.


Item Type:Report / Paper (Working Paper)
Research documents and activity classification:Working Papers > Non-Refereed Working Papers / of national relevance only
Divisions:Department of Business and Management
Additional Information:A revised version of this paper (August 2010) is available on author's webpage: http://docenti.luiss.it/giordani/files/2010/09/runs-sept-2010.pdf
Uncontrolled Keywords:Uncertainty, Multi-Prior Beliefs, Suspension Schemes, Panic- Driven Bank Runs.
MIUR Scientific Area:Area 13 - Economics and Statistics > SECS-P/01 Political Economy
Deposited By:Maria Teresa Nistico
Deposited On:25 Nov 2010 10:02
Last Modified:25 Nov 2010 10:05

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