Abstract From:
ESA 2018 world meeting in Berlin is now available at
https://www.economicscience.org/downloads/2018_ESA_Berlin.pdf
Ekaterina Shakina University of Milan
ABSTRACT
In the current paper I analyze the withdrawal behavior of depositors. By extending the classical Diamond & Dybvig model for the two banks case I give a chance to the players not only to keep or withdraw, but also to reallocate a deposit to another bank. Comparing such a framework with a classical case when two banks are functioning independently, I find out that in case when there is a redepositing option, depositors are better off to use it instead of simply withdrawing. From the economic point of view, it means that in a model with redepositing the consequences of a bank run should be less severe as far as there is no outflow of cash from the banking system rather reallocation of deposits to another bank. I prove that with the help of an experiment showing that subjects are rather reallocating than withdrawing the money when there is a choice between banks. At the same time client of a bank to which the money may be redeposited to demonstrate less withdrawals and panic. Besides that having a complete information about the counterpart moves, helps depositors to cooperate and learn not to panic as time elapses. Lastly I test for the effect of risk aversion as well as gender on the decision-making of players but find no significant influence on the withdrawal behavior. Author(s): Ekaterina Shakina
ESA 2018 world meeting in Berlin is now available at
https://www.economicscience.org/downloads/2018_ESA_Berlin.pdf
Ekaterina Shakina University of Milan
ABSTRACT
In the current paper I analyze the withdrawal behavior of depositors. By extending the classical Diamond & Dybvig model for the two banks case I give a chance to the players not only to keep or withdraw, but also to reallocate a deposit to another bank. Comparing such a framework with a classical case when two banks are functioning independently, I find out that in case when there is a redepositing option, depositors are better off to use it instead of simply withdrawing. From the economic point of view, it means that in a model with redepositing the consequences of a bank run should be less severe as far as there is no outflow of cash from the banking system rather reallocation of deposits to another bank. I prove that with the help of an experiment showing that subjects are rather reallocating than withdrawing the money when there is a choice between banks. At the same time client of a bank to which the money may be redeposited to demonstrate less withdrawals and panic. Besides that having a complete information about the counterpart moves, helps depositors to cooperate and learn not to panic as time elapses. Lastly I test for the effect of risk aversion as well as gender on the decision-making of players but find no significant influence on the withdrawal behavior. Author(s): Ekaterina Shakina