Munich Personal RePEc Archive

Teaching Bank Runs with Classroom Experiments

Balkenborg, Dieter and Kaplan, Todd R. and Miller, Tim (2009): Teaching Bank Runs with Classroom Experiments.

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Abstract

Once relegated to cinema or history lectures, bank runs have become a modern phenomenon that captures the interest of students. We use a simple classroom experiment based upon the Diamond-Dybvig Model (1983) to demonstrate how a bank run, a seemingly irrational event, can occur rationally. We then present possible topics for discussion including various ways to prevent bank runs and moral hazard.

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