Incentives, Communication, and Payment Instruments

FRB Richmond Working Paper No. 00-11

30 Pages Posted: 28 Nov 2012

See all articles by Edward S. Prescott

Edward S. Prescott

Federal Reserve Banks - Federal Reserve Bank of Cleveland

John A. Weinberg

Federal Reserve Banks - Federal Reserve Bank of Richmond

Date Written: November 30, 2000

Abstract

Alternative payment instruments are studied in an economy with private information, delayed communication, and limited commitment. Attention is restricted to checks and bank drafts, which differ in resource cost and communication characteristics. Checks are less costly but settlement delays create a limited commitment constraint. We find that drafts dominate at low wealths and checks at higher wealths. Applications to 19th century and modern payment systems are discussed.

Keywords: means of payment, incentives, communication

JEL Classification: D82, G21

Suggested Citation

Prescott, Edward (Ned) Simpson and Weinberg, John A., Incentives, Communication, and Payment Instruments (November 30, 2000). FRB Richmond Working Paper No. 00-11. Available at SSRN: https://ssrn.com/abstract=2126797 or http://dx.doi.org/10.2139/ssrn.2126797

Edward (Ned) Simpson Prescott (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

P.O. Box 6387
Cleveland, OH 44101
United States

HOME PAGE: http://https://www.clevelandfed.org/people-search?pid=f8ca941e-4b51-41f6-95f8-c87f1d3806e5

John A. Weinberg

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States
804-697-8205 (Phone)
804-697-8255 (Fax)

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