Article ID Journal Published Year Pages File Type
957269 Journal of Economic Theory 2008 14 Pages PDF
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
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