In this paper, we investigate the relationship between the transparency of banks and the fragility of the banking system.We show that information-based bank runs may be inefficient because the deposit contract designed to provide liquidity induces depositors to have excessive incentives to...

This paper demonstrates that, even if depositors are fully rational and always choose the Pareto dominant equilibrium when there are multiple equilibria, a bank run may still occur when depositors' expectations of the bank's fundamentals do not change.More specifically, a bank run may occur when...

In this paper, we investigate the relationship between the transparency of banks and the fragility of the banking system. We show that information-based bank runs may be inefficient because the deposit con-tract designed to provide liquidity induces depositors to have excessive incentives to...

This paper demonstrates that, even if depositors are fully rational and always choose the Pareto dominant equilibrium when there are multiple equilibria, a bank run may still occur when depositors’ expectations of the bank’s fundamentals do not change. More specifically, a bank run may occur...

The subprime crisis triggered a series of bankruptcies and bank runs at a level never experienced since the Great Depression. The banking environment radically changed since the 1930's, in particular the development of information technology decreases considerably the cost of information....