Gresham's Law in a Lemons Market for Assets

S. Aiyagari

Canadian Journal of Economics, 1989, vol. 22, issue 3, 686-97

Abstract: The authors describe a simple environment in which assets of varying qualities may be used for transactions and consumption. The quality of an asset is known to the seller, but not to the buyer. This feature generates a negative relationship between the transactions velocities of assets and their rates of return. They also discuss several versions of Gresham's Law that hold in this environment.

Date: 1989
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