Abstract
In a finite-trader version of the Diamond and Dybvig (J. Polit. Econ. 91 (1983) 401) model, the ex ante efficient allocation is implementable by a direct mechanism (i.e., each trader announces the type of his own ex post preference) in which truthful revelation is the strictly dominant strategy for each trader. When the model is modified by formalizing the sequential-service constraint (cf. Wallace (Fed. Reserve Bank Minneapolis Quart. Rev. 12 (1988) 3)), the truth-telling equilibrium implements the symmetric, ex ante efficient allocation with respect to iterated elimination of strictly dominated strategies.
Original language | English |
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Pages (from-to) | 1-23 |
Number of pages | 23 |
Journal | Journal of Economic Theory |
Volume | 109 |
Issue number | 1 |
DOIs | |
Publication status | Published - 1 Mar 2003 |
Keywords
- Bank run
- Financial intermediation
- Implementation