Barter and Monetary Exchange under Private Information
AbstractThe authors develop a model of production and exchange with uncertainty concerning the quality of commodities and study the role of fiat money in ameliorating frictions caused by private information. The model is specified so that, without private information, only high-quality commodities are produced and there is no welfare gain from using money. With private information, there can be equilibria (and sometimes multiple equilibria) where low-quality commodities are produced and money can increase welfare. Money works by promoting useful production and exchange. In efficient monetary equilibria, agents adopt strategies that increase the probability of acquiring high-quality output. Copyright 1994 by American Economic Association.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 84 (1994)
Issue (Month): 1 (March)
Other versions of this item:
- Williamson, S. & Wright, R., 1991. "Barter and Monetary Exchange Under Private Information," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9107, University of Western Ontario, The Centre for the Study of International Economic Relations.
- Steve Williamson & Randall Wright, 1991. "Barter and monetary exchange under private information," Staff Report 141, Federal Reserve Bank of Minneapolis.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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