Excercise: Consider the Diamond-Dybvig model of bank runs utility function is given by U(c) = √c and that the parameter values are R = 4, discount factor ß = 1/3, and π = 2/5 A) How much do type-1 agents and type-2 agents consume in periods 1 and 2 under autarky, i.e., if there are no banks, insurance companies, or markets? What is the ex-ante expected utility that they derive in this scenario? B) How much do type-1 agents and type-2 agents consume in periods 1 and 2 in the "good" banking equilibrium? What is the ex-ante expected utility that they derive in this scenario? C) How many agents are able to execute their claims in period 1 (i.e., withdraw the maximum amount they have been promised) in the bank run equilibrium?
Excercise: Consider the Diamond-Dybvig model of bank runs utility function is given by U(c) = √c and that the parameter values are R = 4, discount factor ß = 1/3, and π = 2/5
A) How much do type-1 agents and type-2 agents consume in periods 1 and 2 under autarky, i.e., if there are no banks, insurance companies, or markets? What is the ex-ante expected utility that they derive in this scenario?
B) How much do type-1 agents and type-2 agents consume in periods 1 and 2 in the "good" banking equilibrium? What is the ex-ante expected utility that they derive in this scenario?
C) How many agents are able to execute their claims in period 1 (i.e., withdraw the maximum amount they have been promised) in the bank run equilibrium?
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Solve this problem again Why you dont put p ans something wrong in the second part of question
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