EconPapers    
Economics at your fingertips  
 

A Credit Mechanism for Selecting a Unique Competitive Equilibrium

Cheng-Zhong Qin () and Martin Shubik

No 1539, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We show by an iterated process of price normalization that there generically exists a price-normalizing bundle that determines a credit money, such that the enlargement of the general-equilibrium structure to allow for default subject to an appropriate credit limit and default penalty for each trader results in a construction of a simple mechanism for a credit using society to select a unique competitive equilibrium (CE). With some additional conditions, a common credit money can be applied such that any CE can be a unique selection by the credit mechanism with the appropriate credit limit and default penalties for the traders. This will include a CE with the "minimal cash flow" property. Such CEs are special for the reason that they minimize the need for a "substitute-for-trust" (i.e., money) in trade.

Keywords: Competitive equilibrium; Credit mechanism; Marginal utility of income; IOU; Default penalty; Welfare economics (search for similar items in EconPapers)
JEL-codes: D5 C72 E4 (search for similar items in EconPapers)
Date: 2005-10, Revised 2006-11
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: A Credit Mechanism for Selecting a Unique Competitive Equilibrium (2009) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cwl:cwldpp:1539

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Matthew Regan ().

 
Page updated 2019-11-09
Handle: RePEc:cwl:cwldpp:1539