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One or Two Monies?

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  • Janet Hua, Jiang
  • Mei, Dong

Abstract

We investigate whether money constitutes a perfect substitute for the missing record-keeping technology in a quasi-linear environment, where private information and limited commitment are present. We adopt the mechanism design approach and solve a social planner�s problem subject to the resource constraint, the incentive constraints imposed by the existing frictions, and the available memory technologies. The result is that when money is divisible, concealable and in variable supply, a single money may or may not be su¢ cient to replace the record-keeping technology. We further show that two monies serve as a perfect substitute for the record-keeping technology so that there is no need for a third money.

Suggested Citation

  • Janet Hua, Jiang & Mei, Dong, 2008. "One or Two Monies?," MPRA Paper 14846, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:14846
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    References listed on IDEAS

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    Cited by:

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    3. Luis Araujo & Leo Ferraris, 2021. "Societal Benefit of Multiple Currencies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(8), pages 2201-2214, December.

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    More about this item

    Keywords

    Record-keeping; Money; Private Information; Limited Commit- ment; Mechanism Design;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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