Bank runs as a coordination problem within a two-bank set-up: Who will survive?

A LITERATURE REVIEW FOR EXPERIMENTAL STUDIES OF BANK RUNS / Banka Hücumlarına İlişkin Deneysel Çalışmalara Ait Bir Literatür Taraması

“…The results of the study indicates that even if the liquidities of banks are not linked to each other's, the collapse of a bank significantly affects the other bank's default. Shakina (2019) examines the effect of switching deposits from one bank to another in case of a two bank scenario. Shakina (2019)'s results indicate that the first bank is subject to runs more intensely than the second bank.…”

“…Therefore rather than withdrawing their money from the banking system entirely, the depositors choose to move their deposits from one bank to another. The originality of Shakina (2019) stems from the non-exogenous structure of panics.…”

“…Visit en.wikipedia.org/wiki/List_of_bank_runs for more information on the history of bank runs around the World.3 SeeKiss, Rodriguez-Lara, Rosa-Garcia (2016);(2018);Dijk (2017);Peia and Vranceanu (2019);Arifovic and Jiang (2019);Shakina (2019).…”

The initial deposit decision and the occurrence of bank runs

“…This fundamental vulnerability is highlighted by Diamond and Dybvig (1983) who model the situation as a coordination game with two equilibria: a Pareto-optimal equilibrium in which only those depositors in immediate need of money withdraw and a bank run equilibrium in which all depositors withdraw. The model has inspired a large theoretical literature on bank runs and is more recently also being used in a growing number of experimental studies, looking at, among other things, the effectiveness of deposit insurance and suspension of convertibility (Madies, 2006;Davis and Reilly, 2016), the role of information, uncertainty, and sunspots (Schotter and Yorulmazer, 2009;Garratt and Keister, 2009;Kiss et al, 2012Kiss et al, , 2018aShakina and Angerer, 2018;Arifovic and Jiang, 2019;Arifovic et al, 2020), the influence of a bank's vulnerability to early withdrawals (Arifovic et al, 2013), and the effects of a (possible) bank run on other banks (Chakravarty et al, 2014;Brown et al, 2017;Duffy et al, 2019;Shakina, 2019).…”

“…Other experimental bank run studies also don't find differences in risk aversion scores between people that choose to withdraw and people that choose to wait(Kiss et al, 2014(Kiss et al, , 2016(Kiss et al, , 2018aShakina, 2019), but there is some indication that loss aversion plays a role in these type of coordination games(Trautmann and Vlahu, 2013;Kiss et al, 2018a).…”