Stuffing the Mattress: An Experiment on Risk and Bank Runs

Economic tumultuousness has been experienced worldwide as a direct result of bank runs. The occurrence of bank runs depends on complex interactions between people and their expectations, as individuals gain information not only through their own private information, but also through the informal observation of others. The interdependent relationship between investors and institutions in a bank run scenario has regained global attention with the ongoing worldwide recession and is exemplified by traditional commercial bank failures, spanning from the U.S. banking crisis during the 1930‟s to more recent examples today. For example, in July 2008, the Federal Reserve seized California-based IndyMac Bank and closed the $32 billion institution temporarily to prevent a complete run on deposits