Question
The Diamond-Dybvig Model of Bank Runs Suppose that the actual proportion of agents with early liquidity needs really is f=.60, and that this is known
The Diamond-Dybvig Model of Bank Runs
Suppose that the actual proportion of agents with early liquidity needs really is f=.60, and that this is known to everyone in period 0. If the bank (in period 0) offers r1 = 0.95, r2 = 2.15, will agents agree to this contract?
Note: This question involves comparisons of expected utility.
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Managerial Economics and Organizational Architecture
Authors: James Brickley, Jerold Zimmerman, Clifford W. Smith Jr
5th edition
73375829, 978-0073375823
