A Dynamic Model of Settlement

Thorsten Koeppl, Cyril Monnet and Ted Temzelides

No 273529, Queen's Economics Department Working Papers from Queen's University - Department of Economics

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 is supportable if settlement is introduced. This, however, requires that settlement takes place with a sufficiently high frequency.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 20
Date: 2006-02
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Related works:
Journal Article: A dynamic model of settlement (2008)
Working Paper: A dynamic model of settlement (2006)
Working Paper: A Dynamic Model Of Settlement (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:quedwp:273529

DOI: 10.22004/ag.econ.273529

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