A Note on the implementation of the Pareto efficient allocation in the Lagos-Wright model
AbstractThis note modifies Lagos – Wright (2005) by adding subsidies to sellers. We show that this modification can result in a Pareto efficient allocation at the Friedman rule when buyers do not have all the bargaining power. We find that the optimal rate of subsidy is increasing in buyers' relative risk aversion coefficient.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 32 (2012)
Issue (Month): 1 ()
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The Friedman rule; Pareto efficient allocations; Subsidies;
Find related papers by JEL classification:
- E0 - Macroeconomics and Monetary Economics - - General
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