Abstract
Banks are inherently susceptible to panics and bank runs due to the problem of maturity mismatch, resulting in both a stable equilibrium in which the bank survives and an unstable equilibrium in which a bank run occurs. Understanding equilibrium selection in this setting is extremely important for safeguarding financial stability. In this paper one new potential factor that determines whether a bank runs gets triggered or not is experimentally studied, namely the psychological state of the depositor. Prior to participating in an experimental bank run game, subjects are either induced with fear, sadness or happiness using an autobiographical emotion induction task. The findings suggest that the presence of background fear significantly increases the likelihood of withdrawal and a subsequent bank run. In addition women are shown to be significantly more likely to withdraw then men, but only in the fear induction treatment.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
