The threat of counterfeiting in competitive search equilibrium

Enchuan Shao

Journal of Economic Dynamics and Control, 2014, vol. 47, issue C, 168-185

Abstract: This paper studies counterfeiting of bank notes in a monetary model under competitive search. The application of the refinement scheme proposed by Guerrieri et al. (2010) shows that there is no equilibrium with counterfeiting. However, due to the entry margin, counterfeiting poses a threat to the existence of a monetary equilibrium: there is no monetary equilibrium if the cost of producing counterfeits is low enough. Moreover, the threat of counterfeiting can generate an endogenous resalability constraint. An extension of the model is provided which allows the threat of counterfeiting to materialize, in that some buyers cannot observe the offers, and therefore search randomly. Counterfeit notes are produced by those buyers who randomly search.

Keywords: Counterfeiting; Competitive search; Partially directed search (search for similar items in EconPapers)
JEL-codes: D82 D83 E42 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (13)

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Related works:
Working Paper: The Threat of Counterfeiting in Competitive Search Equilibrium (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:47:y:2014:i:c:p:168-185

DOI: 10.1016/j.jedc.2014.07.016

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