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Can the risk of losses upon premature liquidation produce bank runs? We show how a unique run equilibrium driven by asset liquidity risk arises even under minimal fundamental risk. To study the role of illiquidity we introduce realistic norms on bank default, such that mandatory stay is...
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experiments. Contrary to the traditional view of expected utility theory, the choices can be explained in large part by previous … outcomes or surpassed by favorable outcomes. Our results point to reference-dependent choice theories such as prospect theory …
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