Coalition-Proof Trade and the Friedman Rule in the Lagos-Wright Model
AbstractThe Lagos-Wright model-a monetary model in which pairwise meetings alternate in time with a centralized meeting-has been extensively analyzed, but always using particular trading protocols. Here, trading protocols are replaced by two alternative notions of implementability: one that allows only individual defections and one that also allows cooperative defections in meetings. It is shown that the first-best allocation is implementable under the stricter notion without taxation if people are sufficiently patient. And, if people are free to skip the centralized meeting, then lump-sum taxation used to pay interest on money does not enlarge the set of implementable allocations. (c) 2009 by The University of Chicago. All rights reserved..
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Political Economy.
Volume (Year): 117 (2009)
Issue (Month): 1 (02)
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Other versions of this item:
- Tai-wei Hu & John Kennan & Neil Wallace, 2007. "Coalition-Proof Trade and the Friedman Rule in the Lagos-Wright Model," NBER Working Papers 13310, National Bureau of Economic Research, Inc.
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
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