Heterogeneous fragility, systematic panic and optimal transparency

In this study, we provide a model of systematic panic among financial institutions with heterogeneous fragility. During a systematic panic, institutions characterized by a higher degree of fragility are more aggressive to withdrawals, and such aggressiveness increases linearly with their fragility. We derive an analytical solution for this linear relationship using a global game framework, and demonstrate that transparency does not always endanger the regime; When the outside option is large, transparency increases the strength of the regime. •We solve a global game with both fragility and payoff heterogeneity.•Banks adopt a unique linear threshold strategy.•Transparency will increase the regime strength if and only if the outside option is large;