On This Page: No. 2011-13

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


Equilibrium Bank Runs Revisited
Last Updated: 12/01/11

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.