D 2023

An Approach to Explain Bank Runs with Game Theory

VASSILYEV, Ivan

Basic information

Original name

An Approach to Explain Bank Runs with Game Theory

Name in Czech

Přístup k vysvětlení bankovních bankrotů pomocí teorie her

Authors

Edition

První. Praha, Konference doktorandů na Vysoké škole finanční a správní 2023: Prezentace výsledků společenskovědního výzkumu s ekonomickými a finančními efekty (10. ročník), p. 171-178, 8 pp. 2023

Publisher

Vysoké školy finanční a správní

Other information

Language

English

Type of outcome

Stať ve sborníku

Field of Study

50202 Applied Economics, Econometrics

Country of publisher

Czech Republic

Confidentiality degree

není předmětem státního či obchodního tajemství

Publication form

printed version "print"

References:

Organization unit

University of Finance and Administration

ISBN

978-80-7408-270-2

DOI

Keywords (in Czech)

Bank run, game theory, dynamic game of incomplete information, Diamond-Dybvig model

Keywords in English

Bank run, game theory, dynamic game of incomplete information, Diamond-Dybvig model

Tags

Tags

Reviewed
Změněno: 13/12/2023 11:55, Mgr. Tereza Denišová, DiS.

Abstract

ORIG CZ

V originále

This paper presents an approach to understand the bank runs with game theory. In the model, each player decides if they withdraw their deposit from the bank and loose accumulated interest or leave the deposit in the bank risking losing the deposit partially or completely. The model considers interest rates, transaction fees, and deposit insurance. The aim of the contribution is to analyse the root cause of bank runs and investigate the impact of deposit insurance on the depositors’ withdrawal strategies. Within a dynamic game with incomplete information, a playoff matrix for players is build and the results are analyzed. The results show that there two Bayesian Nash equilibrium and two strategies that can be considered as optimal in the game without deposit insurance which leads to a bank run. On the other hand, with deposit insurance introduced in the game, the optimal strategy is to keep the deposits in the bank which minimizes probability of bank runs.

In Czech

This paper presents an approach to understand the bank runs with game theory. In the model, each player decides if they withdraw their deposit from the bank and loose accumulated interest or leave the deposit in the bank risking losing the deposit partially or completely. The model considers interest rates, transaction fees, and deposit insurance. The aim of the contribution is to analyse the root cause of bank runs and investigate the impact of deposit insurance on the depositors’ withdrawal strategies. Within a dynamic game with incomplete information, a playoff matrix for players is build and the results are analyzed. The results show that there two Bayesian Nash equilibrium and two strategies that can be considered as optimal in the game without deposit insurance which leads to a bank run. On the other hand, with deposit insurance introduced in the game, the optimal strategy is to keep the deposits in the bank which minimizes probability of bank runs.