Coalition-Proof Trade and the Friedman Rule in the Lagos-Wright Model
affiliation not provided to SSRN
University of Wisconsin; National Bureau of Economic Research (NBER)
Pennsylvania State University, College of the Liberal Arts - Department of Economic
NBER Working Paper No. w13310
The Lagos-Wright model -- a monetary model in which pairwise meetings alternate in time with a centralized meeting -- has been extensively analyzed, but always using particular trading protocols. Here, trading protocols are replaced by two alternative notions of implementability: one that allows only individual defections and one that also allows cooperative defections in meetings. It is shown that the first-best allocation is implementable under the stricter notion with- out taxation if people are sufficiently patient. And, if people are free to skip the centralized meeting, then lump-sum taxation used to pay interest on money does not enlarge the set of implementable allocations.
Number of Pages in PDF File: 26working papers series
Date posted: August 10, 2007
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