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Money is an experience good: competition and trust in the private provision of money

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  • Ramon Marimon
  • Juan Pablo Nicolini
  • Pedro Teles

Abstract

The interplay between competition and trust as efficiency-enhancing mechanisms in the private provision of money is studied. With commitment, trust is automatically achieved and competition ensures efficiency. Without commitment, competition plays no role. Trust does play a role but requires a bound on efficiency. Stationary inflation must be non-negative and, therefore, the Friedman rule cannot be achieved. The quality of money can be observed only after its purchasing capacity is realized. In this sense, money is an experience good.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 467.

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Date of creation: 2012
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Handle: RePEc:fip:fedmsr:467

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Keywords: Inflation (Finance);

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Trust in private money
    by Economic Logician in Economic Logic on 2011-08-19 14:11:00
  2. Money is an Experience Good: Competition and Trust in the Private Provision of Money
    by Christian Zimmermann in NEP-DGE blog on 2012-05-20 02:18:16
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Cited by:
  1. Dwyer, Gerald P, 2014. "The Economics of Private Digital Currency," MPRA Paper 55824, University Library of Munich, Germany.

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