regarding the Diamond-Dybvig model. Specifically (Calculating the bank's profit after t = 2. In other words, what amount of funds remains at the bank once all depositors have withdrawn? ). For context, the question states there are three periods ( t = 0, 1, 2), a single consumption good, and an illiquid investment oppurtunity that pays gross return 1.1 if liquidated at t = 1, or gross return 2.2 if liquidated at t=2. There are 30 people in the economy endowed with with 1 unit of the consumption good at t = 0. At t = 1, exactly 11 will randomly realize that they need to consume at t = 1 (the early consumers), the remaining 19 people will need to consume at t = 2 (the late consumers). The utility derived from consumption is 1 − (1/c1)2 for early consumers, 1 − (1/c2)2 for late consumers, where the subscript denotes the time of consumption.
I need help solving a question regarding the Diamond-Dybvig model. Specifically (Calculating the bank's profit after t = 2. In other words, what amount of funds remains at the bank once all depositors have withdrawn? ). For context, the question states there are three periods ( t = 0, 1, 2), a single consumption good, and an illiquid investment oppurtunity that pays gross return 1.1 if liquidated at t = 1, or gross return 2.2 if liquidated at t=2. There are 30 people in the economy endowed with with 1 unit of the consumption good at t = 0. At t = 1, exactly 11 will randomly realize that they need to consume at t = 1 (the early consumers), the remaining 19 people will need to consume at t = 2 (the late consumers). The utility derived from consumption is 1 − (1/c1)2 for early consumers, 1 − (1/c2)2 for late consumers, where the subscript denotes the time of consumption.
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