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One or two monies?

  • Dong, Mei
  • Jiang, Janet Hua

The set of incentive-feasible allocations is examined in a dynamic quasi-linear environment where agents lack commitment and have private information over their idiosyncratic characteristics. When record-keeping is available, the first-best allocation is implementable in a set of sufficiently patient economies. When record-keeping is limited to one money, this set is strictly smaller--except when private information is absent. When record-keeping is expanded, but limited to two monies, the set of economies for which the first-best is implementable corresponds to that of record-keeping, even when private information is present. We further demonstrate that two monies are a perfect substitute for record-keeping.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 57 (2010)
Issue (Month): 4 (May)
Pages: 439-450

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Handle: RePEc:eee:moneco:v:57:y:2010:i:4:p:439-450
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