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Policy Discussion Paper, No. 7, December 2009
Information Revelation in the Diamond-Dybvig Banking Model

Three recent papers, Green and Lin, Peck and Shell and Andolfatto et al., study optima in almost identical versions of the Diamond-Dybvig model. They differ about what agents know when they make early withdrawals. The authors of this paper view all three as special cases of a framework in which the planner chooses how much to reveal. It is shown that 1) the Peck-Shell conclusion, the best weakly implementable outcome can be subject to a bank run, is robust to a planner choice about what to reveal; and 2) the solution to the strong implementability problem can be something other than reveal nothing and reveal everything.



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