Please use this identifier to cite or link to this item: http://hdl.handle.net/10201/9723

Title: Do Social Networks Prevent Bank Runs?
Issue Date: 18-Jan-2010
Date of creation: Jan-2010
Related subjects: CDU::3 - Ciencias sociales::33 - Economía
Keywords: Bank runs
Coordination failure
Experimental evidence
Networks
Abstract: We develop, both theoretically and experimentally, a stereotypical environment that allows for co-ordination breakdown, leading to a bank run. Three depositors are located at the nodes of a network and have to decide whether to keep their funds deposited or to withdraw. One of the depositors has immediate liquidity needs, whereas the other two depositors do not. Depositors act sequentially and observe others’ actions only if connected by the network. Theoretically, a link connecting the first two depositors to decide is sufficient to avoid a bank run. However, our experimental evidence shows that subjects’choice is not a¤ected by the existence of the link per se. Instead, being observed and the particular action that is observed determine subjects’choice. Our results highlight the importance of initial decisions in the emergence of a bank run. In particular, Bayesian analysis reveals that subjects clearly depart from predicted behavior when observing a withdrawal.
Primary author: Garcia Rosa, Alfonso
Kiss, Hubert Janos
Rodríguez Lara, Ismael
Faculty / Departments / Services: Departamentos y Servicios::Departamentos de la UMU::Fundamentos del Análisis Económico
Collection: WP-UMUFAE
2010.01
Published in: Proyecto de investigación:
URI: http://hdl.handle.net/10201/9723
Document type: info:eu-repo/semantics/article
Number of pages / Extensions: 20
Rights: info:eu-repo/semantics/openAccess
Appears in Collections:Informes o documentos de trabajo

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