We experimentally test a new extension of the Diamond and Dybvig model with two banks where, in addition to keeping and withdrawing, depositors of the first bank can relocate their deposits to the second bank at no cost. In contrast to the second bank, the first bank experiences more panics, although the number of simultaneous bank runs decreases. We highlight the importance of studying bank runs as a system-related phenomenon where depositors can change their initial deposit allocation.
|Early online date||7 Feb 2019|
|Publication status||Published - 1 Apr 2019|