{"title":"Diamond and Dybvig's classic theory of financial intermediation : what's missing?","authors":"E. Green, P. Lin","doi":"10.21034/QR.2411","DOIUrl":null,"url":null,"abstract":"The article shows that in a finite-trader version of the Diamond and Dybvig model (1983), the ex ante efficient allocation can be implemented as a unique equilibrium. This is so even in the presence of the sequential service constraint, as emphasized by Wallace (1988), whereby the bank must solve a sequence of maximization problems as depositors contact it at different times. A three-trader example with constant relative risk-aversion utility is used in order to illustrate clearly the requirements that the sequential service constraint imposes on implementation.","PeriodicalId":78784,"journal":{"name":"The Quarterly review","volume":"183 1","pages":"3-13"},"PeriodicalIF":0.0000,"publicationDate":"2000-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"104","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"The Quarterly review","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.21034/QR.2411","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 104
Abstract
The article shows that in a finite-trader version of the Diamond and Dybvig model (1983), the ex ante efficient allocation can be implemented as a unique equilibrium. This is so even in the presence of the sequential service constraint, as emphasized by Wallace (1988), whereby the bank must solve a sequence of maximization problems as depositors contact it at different times. A three-trader example with constant relative risk-aversion utility is used in order to illustrate clearly the requirements that the sequential service constraint imposes on implementation.
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