IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Mechanism design and Payments

  • Ted Temzelides

    (University of Pittsburgh)

  • Cyril Monnet

    (European Central Bank)

  • Thor Koeppl

    (Queens University)

We use mechanism design in order to study efficient arrangements when the ability of agents to perform certain welfare-improving transactions is subject to random and unobservable shocks. We study implementation via a payment system that involves assigning balances to participants and optimally adjusting these balances given their histories of transactions. Our analysis has several implications for the design of payment systems. Efficiency requires that, in order to overcome informational frictions, transactions that are subject to high monitoring costs need to be subsidized. Optimal settlement frequency should balance the fixed cost of settlement against the costs arising from providing intertemporal incentives. Settlement costs must be borne by those participants for whom certain participation constraints are slack.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 23.

in new window

Date of creation: 2007
Date of revision:
Handle: RePEc:red:sed007:23
Contact details of provider: Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Charles M. Kahn & William Roberds, 1997. "Payment system settlement and bank incentives," Proceedings 537, Federal Reserve Bank of Chicago.
  2. Hiroshi Fujiki & Edward J. Green & Akira Yamazaki, 1999. "Sharing the risk of settlement failure," Working Papers 594, Federal Reserve Bank of Minneapolis.
  3. David C. Mills, Jr., 2005. "Alternative central bank credit policies for liquidity provision in a model of payments," Finance and Economics Discussion Series 2005-55, Board of Governors of the Federal Reserve System (U.S.).
  4. Charles M. Kahn & William Roberds, 1999. "Real-time gross settlement and the costs of immediacy," FRB Atlanta Working Paper No. 98-21, Federal Reserve Bank of Atlanta.
  5. Thorsten Koeppl & Cyril Monnet & Ted Temzelides, 2006. "A Dynamic Model of Settlement," Working Papers 1053, Queen's University, Department of Economics.
  6. de O. Cavalcanti, Ricardo & Erosa, Andrés & Temzelides, Ted, 2004. "Liquidity, money creation and destruction, and the returns to banking," Working Paper Series 0394, European Central Bank.
  7. Temzelides, Ted & Williamson, Stephen D., 2001. "Payments Systems Design in Deterministic and Private Information Environments," Journal of Economic Theory, Elsevier, vol. 99(1-2), pages 297-326, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:red:sed007:23. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.