Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
957269 | Journal of Economic Theory | 2008 | 14 Pages |
Abstract
We investigate the role of settlement in a dynamic model of a payment system where the ability of participants to perform certain welfare-improving transactions is subject to random and unobservable shocks. In the absence of settlement, the full information first-best allocation cannot be supported due to incentive constraints. In contrast, this allocation can be supported if settlement is introduced, provided that it takes place with a sufficiently high frequency.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Thorsten Koeppl, Cyril Monnet, Ted Temzelides,