This paper introduces the possibility of signaling into a finite-depositor version of the Diamond-Dybvig model. More precisely, the decision to keep the funds in the bank is assumed to be unobservable, but depositors are allowed to make it observable by signaling, at a cost. Depositors decide...

We study the effects of deposit insurance and observability of previous actions on the emergence of bank runs by means of a controlled laboratory experiment. We consider three depositors in the line of a common bank. Depositors decide in sequence between withdrawing or keeping their money...

We study the Diamond-Dybvig model of fi nancial intermediation (JPE, 1983) under the assumption that depositors have information about previous decisions. Depositors decide sequentially whether to withdraw their funds or continue holding them in the bank. If depositors observe the history of all...

We provide experimental evidence that panic bank runs occur in the absence of problems with fundamentals and coordination failures among depositors, the two main culprits identified in the literature. Depositors withdraw when they observe that others do so, even when theoretically they should...

Based on empirical and experimental data, the study provides an overview of the literature on the behaviour of depositors. On this basis, it establishes that depositors' decisions and thus the phenomenon of mass deposit withdrawals can be explained by fundamental problems as well as coordination...