In the Diamond Dybvig model, a bank run occurs when

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In the Diamond Dybvig model, a bank run occurs when some depositors fear that many other depositors may demand withdrawal at the same time. This fear leads them to run to the bank and withdraw their deposits, causing a chain reaction that leads to a collapse of the bank even if it was initially solvent. Hence, the bank run is based on the coordination problem of depositors, and the fear that arises from the uncertainty about others' actions. Option A is not a factor in the model since bank managers are assumed to act in the interest of the bank and its depositors. Option B may happen but is not necessarily the cause of the bank run. Option D and E may have an impact on the situation, but they are not the primary cause of the bank run in the Diamond Dybvig model.

In the Diamond Dybvig Model, a Bank Run Occurs When