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Only Paul Could Go To Changchun

Global Games Approach for Bank Runs: an Experimental Study

7/12/2018

 
Here.

 This thesis explores a bank run experiment with the global games approach. We test whether depositors employ threshold strategies when deciding about early withdrawal. Furthermore, we investigate whether ‘taught’ students show a behavior that is more reconcilable with theoretical predictions, and whether presenting the depositors with additional information regarding the withdrawal behavior of their peer players simplifies coordination. To answer these questions a model of bank runs using the global games approach is set up and tested experimentally in a classroom environment. The results indicate that investors employ threshold strategies but the observed threshold values are much lower than what theory suggests. Moreover, the investigation points out that ‘taught’ subjects comply better with the theoretical prediction. The thresholds of ‘taught’ subjects are higher and cooperation in the groups is lower.


From:

Rene Hegglin
 University of Zurich

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