TY - JOUR
T1 - Implementing efficient allocations in a model of financial intermediation
AU - GREEN, Edward J.
AU - LIN, Ping
PY - 2003/3/1
Y1 - 2003/3/1
N2 - 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.
AB - 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.
KW - Bank run
KW - Financial intermediation
KW - Implementation
UR - http://commons.ln.edu.hk/sw_master/2139
UR - http://www.scopus.com/inward/record.url?scp=0037950053&partnerID=8YFLogxK
U2 - 10.1016/S0022-0531(02)00017-0
DO - 10.1016/S0022-0531(02)00017-0
M3 - Journal Article (refereed)
SN - 0022-0531
VL - 109
SP - 1
EP - 23
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 1
ER -