Teaching Bank Runs with Classroom Experiments

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

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: bank runs; multiple equilibria
• Subjects: A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics > A22 - Undergraduate; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C92 - Laboratory, Group Behavior; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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