A dynamic model of settlement

Thorsten V. Koeppl (), Cyril Monnet () and Ted Temzelides

Journal of Economic Theory, 2008, vol. 142, issue 1, pages 233-246

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.

Date: 2008

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Related works:
Working Paper: A Dynamic Model of Settlement (2006)
Working Paper: A dynamic model of settlement (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:eee:jetheo:v:142:y:2008:i:1:p:233-246

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