We modify the Diamond-Dybvig model studied in Green and Lin to incorporate a self-interested banker who has a private record-keeping technology. A public record-keeping device does not exist. We find that there is a trade-off between sophisticated contracts that possess relatively good...

We study the Diamond-Dybvig [Bank runs, deposit insurance, and liquidity, J. Polit. Econ. 91 (1983) 401-419] model as developed in Green and Lin [Implementing efficient allocations in a model of financial intermediation, J. Econ. Theory 109 (2003) 1-23] and Peck and Shell [Equilibrium bank runs,...

The business of money creation is conceptually distinct from that of intermediation. Yet, these two activities are frequently--but not always--combined together in the form of a banking system. We develop a simple model to examine the question: When is banking essential? There is a role for...

We construct a simple environment that combines a limited communication friction and a limited information friction in order to generate a role for money and intermediation. We ask whether there is any reason to expect the emergence of a banking sector (i.e., institutions that combine the...