GOLDSTEIN, ITAY; PAUZNER, ADY - In: Journal of Finance 60 (2005) 3, pp. 1293-1327
<link rid="b12">Diamond and Dybvig (1983)</link> show that while demand-deposit contracts let banks provide liquidity, they expose them to panic-based bank runs. However, their model does not provide tools to derive the probability of the bank-run equilibrium, and thus cannot determine whether banks increase welfare...