Information Objectivity and Accuracy in a Bank Run Model

In this paper, we develop and analyze the roles of two information properties in a simple bank run model. They are objectivity and accuracy of a given information source, originally discussed by an early, in‡uential accounting work by Ijiri and Jaedicke (1966). We operationalize the two properties using a modeling technique from a recent work by Myatt and Wallace (2012) and embed the information source into an otherwise standard model of bank-runs in the spirit of Morris and Shin (2001). We show that, when compared with the accuracy property, the objectivity property plays a distinct and positive role for the economy, exhibiting a comparative advantage in mitigating ine¢ cient, excess bank runs. In fact, it is possible that improving objectivity discourages while improving accuracy encourages such runs.