One or Two Monies?
AbstractWe investigate whether money constitutes a perfect substitute for the missing record-keeping technology in a quasi-linear environment, where private information and limited commitment are present. We adopt the mechanism design approach and solve a social planner�s problem subject to the resource constraint, the incentive constraints imposed by the existing frictions, and the available memory technologies. The result is that when money is divisible, concealable and in variable supply, a single money may or may not be su¢ cient to replace the record-keeping technology. We further show that two monies serve as a perfect substitute for the record-keeping technology so that there is no need for a third money.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 14846.
Date of creation: 21 Sep 2008
Date of revision:
Record-keeping; Money; Private Information; Limited Commit- ment; Mechanism Design;
Other versions of this item:
- F30 - International Economics - - International Finance - - - General
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-02 (All new papers)
- NEP-CTA-2009-05-02 (Contract Theory & Applications)
- NEP-DGE-2009-05-02 (Dynamic General Equilibrium)
- NEP-MAC-2009-05-02 (Macroeconomics)
- NEP-MON-2009-05-02 (Monetary Economics)
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