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Communal Responsibility and the Coexistence of Money and Credit Under Anonymous Matching

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  • Ritschl, Albrecht
  • Boerner, Lars

Abstract

Communal responsibility, a medieval institution studied by Greif (2006), supported the use of credit among European merchants in the absence of modern enforcement technologies. This paper shows how this mechanism helps to overcome enforcement problems in anonymous buyer/seller transactions. In a village economy version of the Lagos and Wright (2005) model, agents trading anonymously in decentralized markets can be identified by their citizenship and thus be held liable for each other. Enforceability within each village's centralized afternoon market ensures collateralization of credit in decentralized markets. In the resulting equilibrium, money and credit coexist in decentralized markets if the use of credit is costly. Our analysis easily extends itself to other payment systems like credit cards that provide a group identity to otherwise anonymous agents.

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  • Ritschl, Albrecht & Boerner, Lars, 2011. "Communal Responsibility and the Coexistence of Money and Credit Under Anonymous Matching," CEPR Discussion Papers 8184, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:8184
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    11. Berentsen, Aleksander & Camera, Gabriele & Waller, Christopher, 2007. "Money, credit and banking," Journal of Economic Theory, Elsevier, vol. 135(1), pages 171-195, July.
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    15. Börner, Lars & Hatfield, John William, 2010. "The economics of debt clearing mechanisms," Discussion Papers 2010/27, Free University Berlin, School of Business & Economics.
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    Cited by:

    1. Lars Boerner & Albrecht Ritschl, 2009. "The Economic History of Sovereignty: Communal Responsibility, the Extended Family, and the Firm," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 165(1), pages 99-112, March.
    2. Maciejczak, Mariusz, 2015. "Will the institution of coexistence be re-defined by TTIP?," GMCC-15: Seventh GMCC, November 17-20, 2015, Amsterdam, the Netherlands 211478, International Conference on Coexistence between Genetically Modified (GM) and non-GM based Agricultural Supply Chains (GMCC).
    3. Basteck, Christian & Daniëls, Tijmen R., 2011. "Every symmetric 3×3 global game of strategic complementarities has noise-independent selection," Journal of Mathematical Economics, Elsevier, vol. 47(6), pages 749-754.
    4. Börner, Lars & Hatfield, John William, 2010. "The economics of debt clearing mechanisms," Discussion Papers 2010/27, Free University Berlin, School of Business & Economics.

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    More about this item

    Keywords

    Anonymous matching; Bills of exchange; Communal responsibility; Money and credit demand;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • N2 - Economic History - - Financial Markets and Institutions

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