Another Example of a Credit System that Coexists with Money

26 Pages Posted: 23 Dec 2014

See all articles by Gabriele Camera

Gabriele Camera

Chapman University - Economic Science Institute; University of Bologna - Dept. of Economics

Yiting Li

National Taiwan University

Date Written: December 22, 2014

Abstract

We study an economy in which exchange occurs pairwise, there is no commitment, and anonymous agents choose between random monetary trade or deterministic credit trade. To accomplish the latter, agents can exploit a costly technology that allows limited record-keeping and enforcement. An equilibrium with money and credit is shown to exist if the cost of using the technology is sufficiently small. Anonymity, record-keeping, and enforcement limitations also permit some incidence of default, in equilibrium.

Keywords: credit, default, money, search

JEL Classification: E40, E50, E51, G20

Suggested Citation

Camera, Gabriele and Li, Yiting, Another Example of a Credit System that Coexists with Money (December 22, 2014). Available at SSRN: https://ssrn.com/abstract=2541953 or http://dx.doi.org/10.2139/ssrn.2541953

Gabriele Camera (Contact Author)

Chapman University - Economic Science Institute ( email )

Orange, CA 92866
United States

HOME PAGE: http://www1.chapman.edu/~camera/

University of Bologna - Dept. of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Yiting Li

National Taiwan University ( email )

1 Sec. 4, Roosevelt Road
Taipei 106, 106
Taiwan

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