Production, hidden action, and the payment system
Using a modified version of Freeman's (1996) payment system model, the optimal intraday rate is examined. The production set is modified to account for a non-degenerate distribution of settlements within a day. In addition to the modified production set, the consumption set is modified. A positive intraday interest rate may be able to implement the planner's allocation.
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1004, Department of Economics, University of Missouri.
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