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Money is an Experience Good: Competition and Trust in the Private Provision of Money

Author

Listed:
  • Ramon Marimon
  • Juan Pablo Nicolini
  • Pedro Teles

Abstract

We study the interplay between competition and trust as efficiency-enhancing mechanims in the private provision of money. 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 effciency. Stationary inflation must be non-negative and, therefore, the Friedman rule cannot be achieved. The quality of money can only be observed after its purchasing capacity is realized. In that sense money is an experience good.

Suggested Citation

  • Ramon Marimon & Juan Pablo Nicolini & Pedro Teles, 2011. "Money is an Experience Good: Competition and Trust in the Private Provision of Money," Economics Working Papers ECO2011/24, European University Institute.
  • Handle: RePEc:eui:euiwps:eco2011/24
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    References listed on IDEAS

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    Cited by:

    1. Waknis, Parag, 2017. "Competitive Supply of Money in a New Monetarist Model," MPRA Paper 75401, University Library of Munich, Germany.
    2. Dwyer, Gerald P, 2014. "The Economics of Private Digital Currency," MPRA Paper 55824, University Library of Munich, Germany.
    3. Dwyer, Gerald P., 2015. "The economics of Bitcoin and similar private digital currencies," Journal of Financial Stability, Elsevier, vol. 17(C), pages 81-91.

    More about this item

    Keywords

    Currency competition; Trust; Inflation;

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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