Each player in a group deposits $100 at a bank, which is used to make a loan which will certainly be repaid. Each day until repayment (or bank failure), each player simultaneously chooses whether to withdraw, and the number of withdrawals is announced to all. The bank can honor a certain number of withdrawals, but if too many withdraw, the bank fails and those who have not withdrawn lose their investment. If the bank does not fail, then all who have not withdrawn receive a return on their investment.

Brief Instructions

It is implicitly assumed that the bank receives interest-free loansup to the liquidation value of its investmentto cover early withdrawals. Therefore, the Liquidation Rate determines the number of safe withdrawals (displayed to students) as well as how withdrawals are processed if the bank fails.

Assume ten $100-depositors with a 35% liquidation rate. On day 1, there are two withdrawals. The bank honors them by borrowing $200. On day 2, another two players withdraw. Unable to borrow enough to honor these withdrawals, the bank fails. It liquidates its investment (receiving $350), and has $150 left after repaying the loans it took to honor day-one withdrawals. It returns $75 to each of the day-two withrawals, and nothing to the six who did not withdraw.

By default, Group Size is 6, the bank returns $150 on a $100 Deposit not withdrawn after three days (Rate of Return (%)=50 and Days to Maturity=3), and the Liquidation Rate is 60%. Keeping these default parameters but setting Periods greater than 1 (i.e., groups remain fixed over multiple periods) will generally result in some groups converging to day-one withdrawals and others finding the equilibrium where nobody withdraws.

Sample question:

What is the total dollar amount invested (deposited)? $