Implementing Efficient Allocations in a Model of Financial Intermediation

Creator

• Green, Edward J.
• Lin, Ping

Series

• Working paper (Federal Reserve Bank of Minneapolis. Research Department)

Issue number

• 576

Date Created

• 1996-10

Abstract

• In a finite-trader version of the Diamond-Dybvig (1983) model, the symmetric, 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, 1988), the truth-telling equilibrium implements the symmetric, ex-ante efficient allocation with respect to iterated elimination of strictly dominated strategies.

Subject (JEL)

• G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• D82 - Asymmetric and Private Information; Mechanism Design

Stichwort

• Implementation
• Financial intermediation
• Bank run

Related information

• Published in: Journal of Economic Theory (Vol. 109, No. 1, March 2003, pp. 1-23), https://doi.org/10.1016/S0022-0531(02)00017-0.

Corporate Author

• Federal Reserve Bank of Minneapolis. Research Department

Publisher

• Federal Reserve Bank of Minneapolis

Resource type

• Research Paper

DOI

•  https://doi.org/10.21034/wp.576

License

• Creative Commons BY-NC Attribution-NonCommercial 4.0 International

Beziehungen

In Collection:

• Working Papers

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