A Note on the implementation of the Pareto efficient allocation in the Lagos-Wright model
This 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.
Volume (Year): 32 (2012)
Issue (Month): 1 ()
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