Title

Implementing efficient allocations in a model of financial intermediation

Document Type

Journal article

Source Publication

Journal of Economic Theory

Publication Date

3-1-2003

Volume

109

Issue

1

First Page

1

Last Page

23

Keywords

Bank run, Financial intermediation, Implementation

Abstract

In a finite-trader version of the Diamond and Dybvig (J. Polit. Econ. 91 (1983) 401) 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 (Fed. Reserve Bank Minneapolis Quart. Rev. 12 (1988) 3)), the truth-telling equilibrium implements the symmetric, ex ante efficient allocation with respect to iterated elimination of strictly dominated strategies.

DOI

10.1016/S0022-0531(02)00017-0

Print ISSN

00220531

E-ISSN

10957235

Publisher Statement

Copyright © 2002 Elsevier Science (USA)

Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Recommended Citation

Green, E. J., & Lin, P. (2003). Implementing efficient allocations in a model of financial intermediation. Journal of Economic Theory, 109(1), 1-23. doi: 10.1016/S0022-0531(02)00017-0