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Incentives to produce quality and the liquidity of money (*)

Author

Listed:
  • Alberto Trejos

    (Department of Economics, Northwestern University, 2003 Sheridan Road, Evanston, IL 60208, USA, and Institut d'AnÁlisi EconÔmica, Universitat AutÔnoma de Barcelona, Campus UAB-Bellaterra, E-08193 Bellaterra, SPAIN)

Abstract

I study a version of the Williamson-Wright (1994) model that results from ruling out direct barter. Although one can no longer argue that the value of money comes exclusively from private information, one can use the simplified model to address a variety of other issues. In particular, one can characterize analytically the set of equilibria and their properties. One can also analyze the trade-off between providing liquidity to facilitate trade and providing incentives to produce high quality, and address some other issues related to policy and welfare, including the effects of inflation on the incentives to produce high quality.

Suggested Citation

  • Alberto Trejos, 1997. "Incentives to produce quality and the liquidity of money (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 9(2), pages 355-365.
  • Handle: RePEc:spr:joecth:v:9:y:1997:i:2:p:355-365
    Note: Received: May 10, 1995; revised October 9, 1995
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    Citations

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    Cited by:

    1. François R. Velde & Warren E. Weber & Randall Wright, 1999. "A Model of Commodity Money, with Applications to Gresham's Law and the Debasement Puzzle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 291-323, January.
    2. repec:eee:jetheo:v:176:y:2018:i:c:p:957-986 is not listed on IDEAS
    3. Ennis, Huberto M., 2008. "Search, money, and inflation under private information," Journal of Economic Theory, Elsevier, vol. 138(1), pages 101-131, January.
    4. Rocheteau, Guillaume, 2011. "Payments and liquidity under adverse selection," Journal of Monetary Economics, Elsevier, vol. 58(3), pages 191-205.
    5. Berentsen, Aleksander & McBride, Michael & Rocheteau, Guillaume, 2017. "Limelight on dark markets: Theory and experimental evidence on liquidity and information," Journal of Economic Dynamics and Control, Elsevier, vol. 75(C), pages 70-90.
    6. repec:eee:jetheo:v:176:y:2018:i:c:p:619-649 is not listed on IDEAS
    7. Benjamin Lester & Andrew Postlewaite & Randall Wright, 2008. "Information, Liquidity and Asset Prices," PIER Working Paper Archive 08-039, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    8. Jun Zhang & Haibin Wu, 2004. "Money, Technology Choice and Pattern of Exchange in Search Equilibrium," Econometric Society 2004 North American Summer Meetings 212, Econometric Society.
    9. Huberto M. Ennis, 2009. "Avoiding The Inflation Tax," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(2), pages 607-625, May.

    More about this item

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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