IDEAS home Printed from https://ideas.repec.org/a/cud/journl/v34y2011i94p20-26.html
   My bibliography  Save this article

A Diamond-Dybvig model without bank run: the power of signaling

Author

Listed:
  • Hubert Janos Kiss

    (Universidad Autónoma de Madrid, España)

Abstract

This paper introduces the possibility of signaling into a finite-depositor version of the Diamond-Dybvig model. More precisely, the decision to keep the funds in the bank is assumed to be unobservable, but depositors are allowed to make it observable by signaling, at a cost. Depositors consecutively decide whether to withdraw their funds or continue holding balances in the bank, and they choose if they want to signal the latter decision. If the cost of signaling is moderate, then bank runs do not occur. Moreover, in the unique outcome no signals are made, so the unconstrained-efficient allocation is implemented without any costs.

Suggested Citation

  • Hubert Janos Kiss, 2011. "A Diamond-Dybvig model without bank run: the power of signaling," Cuadernos de Economía - Spanish Journal of Economics and Finance, Asociación Cuadernos de Economía, vol. 34(94), pages 20-26, Enero-Abr.
    • Handle: RePEc:cud:journl:v:34:y:2011:i:94:p:20-26
    as

    Download full text from publisher

    File URL: https://repositorio.uam.es/bitstream/handle/10486/681874/CE_94_3.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    Bank run; Sequential game; Signaling; Iterated deletion of strictly dominated strategies; Coordination;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cud:journl:v:34:y:2011:i:94:p:20-26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Erick Tinsson (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.