Question: In the Diamond Dybvig banking model suppose that the banking contract

In the Diamond–Dybvig banking model, suppose that the banking contract includes a suspension of convertibility provision according to which the bank allows only the first tN depositors in line in period 1 to withdraw their deposits. Will there still be a bank run equilibrium? Carefully explain why or why not.


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  • CreatedDecember 05, 2014
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