Frankel, David M.

WP #10024, July 2010

Many recent models of crises involve games with small, anonymous players and finite action sets, such as whether or not to attack a currency or withdraw funds from a bank.  We show that such models, when repeated, do not yield recurring crises in the presence of a flexible class of payoff shocks.  As an illustration, we apply this result to Diamond and Dybvig's model of bank runs.

JEL Classification: C73, E32