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No. 2011-13

Peck and Shell (2003) show that it is possible to get a bank run in a
Diamond-Dybvig environment.

Last Updated: 12/01/2011

Equilibrium Bank Runs Revisited

Ed Nosal

Peck and Shell (2003) show that it is possible to get a bank run in a Diamond-Dybvig environment. The mechanism they use, however, is not an optimal one. When an optimal mechanism is used, the bank run equilibrium disappears.