We analyze the role of liability, insurance, and side payments for independent safety controls with unobservable care levels. By independent safety controls we mean that the accident probability depends on the care levels of two parties, and that the effects of the controls on the accident...

We demonstrate that a bank can offer demand deposits and yet avoid bank runs without deposit insurance if it also offers time deposits that have a low liquidation value. Self-fulfilling runs do not occur, as maturity mismatch is eliminated. To do this, we modify Diamond and Dybvig"s [1983] model...

This paper develops a panic-free bank system in an OLG model. A bank issues both demand deposits and time deposits (or bank stocks) so that the maturity-matching constraint is satisfied. The agents who cannot participate in capital markets put their savings in demand deposits; others favour...