Uncertainty Averse Bank Runners

Bank runs are relatively rare events characterized by highly pessimistic depositors' expectations. How would pessimistic depositors expect to be treated in a bank run? How will this affect their behaviour? How can banks handle this kind of risk? In the framework of a Diamond-Dybvig-Peck-Shell banking model, in which a broad class of feasible contractual arrangements (including "suspension schemes") is allowed and which admits a run equilibrium, we analyze a scenario in which depositors are uncertain of their treatment should a run occur. We check whether bank runs are more likely or less likely to happen, in particular, if depositors are maxmin decision makers. We assess the utility of suspension schemes in the presence of uncertainty averse bank runners.