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

  • Marimon, Ramon
  • Nicolini, Juan Pablo
  • Teles, Pedro

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

Volume (Year): 59 (2012)
Issue (Month): 8 ()
Pages: 815-825

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Handle: RePEc:eee:moneco:v:59:y:2012:i:8:p:815-825
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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