TY  - JOUR
AU  - He,Zhiguo
AU  - Manela,Asaf
TI  - Information Acquisition in Rumor Based Bank Runs
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18513
PY  - 2012
Y2  - November 2012
UR  - http://www.nber.org/papers/w18513
L1  - http://www.nber.org/papers/w18513.pdf
N1  - Author contact info:
Zhiguo He
University of Chicago
Booth School of Business
5807 S. Woodlawn Avenue
Chicago, IL 60637
Tel: 773/834-3769
E-Mail: zhiguo.he@chicagobooth.edu

Asaf Manela
Campus Box 1133
One Brookings Drive
St. Louis, MO 63130
E-Mail: amanela@wustl.edu
AB  - We study information acquisition and withdrawal decisions when a liquidity event triggers a spreading rumor and exposes a solvent bank to a run. Uncertainty about the bank's liquidity and potential failure motivates agents who hear the rumor to acquire additional signals. Depositors with unfavorable signals may wait and thus gradually run on the bank, leading to an endogenous aggregate withdrawal speed. A bank run equilibrium exists when agents aggressively acquire information. We study threshold parameters (e.g. liquidity reserve and deposit insurance) that eliminate runs. Public provision of solvency information can eliminate runs by indirectly crowding-out individual depositors' effort to acquire liquidity information. However, providing too much information that slightly differentiates competing solvent-but-illiquid banks can result in inefficient runs
ER  -