Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70444
Authors: 
Gu, Chao
Year of Publication: 
2007
Series/Report no.: 
CAE Working Paper 07-15
Abstract: 
Traditional models of bank runs do not allow for herding effects, because in these models withdrawal decisions are assumed to be made simultaneously. I extend the banking model to allow a depositor to choose his withdrawal time. When he withdraws depends on his liquidity type (patient or impatient), his private, noisy signal about the quality of the bank's portfolio, and the withdrawal histories of the other depositors. In some cases, the optimal banking contract permits herding runs. Some of these runs are efficient in that the bank is liquidated before the portfolio worsens. Others are not efficient; these are cases in which the herd is misled.
Subjects: 
bank runs
herding
imperfect information
perfect Bayesian equilibrium
optimal bank contract
sequential-move game
fundamental-based bank runs
JEL: 
C73
D82
E59
G21
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.