Implementing efficient allocations in a model of financial intermediation

Authors

Edward J. GREENFollow

Document Type

Paper Series

Publication Date

1999

No.

92

Abstract

In a nite-trader version of the Diamond and Dybvig (1983) model, the ex-ante efficient allocation is implementable by a direct mechanism (i.e., each trader announces the type of his own ex-post preference) in which truthful revelation is the strictly dominant strategy for each trader. When the model is modified by formalizing the sequential-service constraint (cf. Wallace, 1988), the truth-telling equilibrium implements the symmetric, ex-ante efficient allocation with respect to iterated elimination of strictly dominated strategies.

Comments

CPPS Working Paper Series No.92 (4/99)

Recommended Citation

Green, E. J. (1999). Implementing efficient allocations in a model of financial intermediation (CPPS Working Paper Series No.92). Retrieved from Lingnan University website: http://commons.ln.edu.hk/cppswp/46/