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Working Paper

The Role of Independence in the Green-Lin Diamond-Dybvig Model

Green and Lin study a version of the Diamond-Dybvig model with a finite number of agents, independence (independent determination of each agent's type), and sequential service. For special preferences, they show that the ex ante first-best allocation is the unique equilibrium outcome of the model with private information about types. Via a simple argument, it is shown that uniqueness of the truth-telling equilibrium holds for general preferences, and, in particular, for a constrained-efficient allocation whether first-best or not. The crucial assumption is independence.

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.


Suggested Citation

Andolfatto, David, Ed Nosal, and Neil Wallace. 2006. “The Role of Independence in the Green-Lin Diamond-Dybvig Model.” Federal Reserve Bank of Cleveland, Working Paper No. 06-15. https://doi.org/10.26509/frbc-wp-200615