Currency and Credit Are Equivalent Mechanisms
The author studies a pure exchange economy with many agents whose marginal utility of consumption is stochastically heterogeneous and independent of wealth, with realized marginal utility of wealth private information. He shows that currency and credit are equivalent to a contract that is efficient when the privacy of information is viewed as a constraint and that the cash-in-advance constraint is an expression of an incentive constraint. Copyright 1994 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Volume (Year): 35 (1994)
Issue (Month): 4 (November)
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