Zimper, Alexander2014-02-242014-02-242013-12Zimper, A 2013, 'On the welfare equivalence of asset markets and banking in Diamond Dybvig economies', Economics Letters, vol.121, no. 3, pp. 356-359.0165-1765 (print)1873-7374 (online)10.1016/j.econlet.2013.09.023http://hdl.handle.net/2263/36672Why do people choose bank deposit contracts over a direct participation in asset markets? In their seminal paper, Diamond and Dybvig’s (1983) answer this question by claiming that bank deposit contracts can implement allocations that are welfare superior to asset markets equilibria. The present paper demonstrates that this claim is false whenever the asset market participants are highly rational.en© 2013 Elsevier. All rights reserved. Notice : this is the author’s version of a work that was accepted for publication in Economics Letters. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Economics Letters, vol. 121, no.3, pp.356-359,2013. doi : 10.1016/j.econlet.2013.09.023Demand deposit contractAsset marketAsymmetric informationPostprint Article