Barter and monetary exchange under private information

Stephen Williamson and Randall Wright

No 141, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: We analyze economies with private information concerning the quality of commodities. Without private information there is a nonmonetary equilibrium with only high quality commodities produced, and money cannot improve welfare. With private information there can be equilibria with bad quality commodities produced, and sometimes only nonmonetary equilibrium is degenerate. The use of money can lead to active (i.e., nondegenerate) equilibria when no active nonmonetary equilibrium exists. Even when active nonmonetary equilibria exist, with private information money can increase welfare via its incentive effects: in monetary equilibrium, agents may adopt trading strategies that discourage production of low quality output.

Keywords: Money; theory (search for similar items in EconPapers)
Date: 1991
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Citations: View citations in EconPapers (34)

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Related works:
Journal Article: Barter and Monetary Exchange under Private Information (1994)
Working Paper: Barter and Monetary Exchange Under Private Information (1991)
Working Paper: Barter and Monetary Exchange Under Private Information (1991)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmsr:141

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