Private Versus Public Money
I show that the nature of agents' production determines whether they should issue money. I use a matching model with no commitment and no enforcement. Some agents can produce goods, whereas others are unproductive. All agents can produce at a cost a distinguishable, intrinsically useless but durable good: notes. Productive agents produce red notes whereas unproductive agents produce green notes. I find that green notes are the most efficient means of exchange, as they implement more allocations than red notes and at a lower cost. Therefore, unproductive agents should issue money. I associate unproductive agents to agents producing public goods. Copyright 2006 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.
Volume (Year): 47 (2006)
Issue (Month): 3 (08)
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