Three recent papers, Green and Lin, Peck and Shell and Andolfatto et al., study optima in almost identical versions of the Diamond-Dybvig model. They differ about what agents know when they make early withdrawals. The authors of this paper view all three as special cases of a framework in which the planner chooses how much to reveal. It is shown that 1) the Peck-Shell conclusion, the best weakly implementable outcome can be subject to a bank run, is robust to a planner choice about what to reveal; and 2) the solution to the strong implementability problem can be something other than reveal nothing and reveal everything.
Policy Discussion Paper,
No. 7,
December
2009
Information Revelation in the Diamond-Dybvig Banking Model