Is Nonprice Competition in Currency Inefficient?
Lawrence H. White
George Mason University - Department of Economics
Donald J. Boudreaux
George Mason University - Department of Economics
Journal of Money, Credit, and Banking, Vol. 30, No. 2 (May 1998)
Abstract:
Note: This is a description of the paper and not the abstract as it appeared in the print journal. Some economists believe that the competitive survival of non-interest-bearing currency--the absence of price competition from markets for stored-value cards, banknotes, and token coins--implies a waste of resources on nonprice competition. We argue to the contrary that market forces drive issuers toward an efficient mix of price and nonprice competition. Where economic costs (rather than legal restrictions) rule out the delivery of interest on currency, competition exclusively along non-price dimensions is consistent with efficiency. We graphically illustrate such a case.
JEL Classification: E30, C32, N10
Accepted Paper Series
Suggested Citation
White, Lawrence H. and Boudreaux, Donald J., Is Nonprice Competition in Currency Inefficient?. Journal of Money, Credit, and Banking, Vol. 30, No. 2 (May 1998). Available at SSRN: http://ssrn.com/abstract=49257
