(ECO2017-82449-P) Funder: Spanish Ministry of Economy, Industry and Competitiveness
In a Diamond–Dybvig type model of financial intermediation, we allow depositors to
announce at a positive cost to subsequent depositors that they keep their funds deposited
in the bank. Theoretically, the mere availability of public announcements (and not
its use) ensures that no bank run is the unique equilibrium outcome. Multiple equilibria—including
bank run—exist without such public announcements. We test the theoretical results
in the lab and find a widespread use of announcements, which we interpret as an attempt
to coordinate on the no bank run outcome. Withdrawal rates in general are lower in
information sets that contain announcements.
