Payment networks in a search model of money

Antoine Martin, Michael Orlando () and David Skeie

No 263, Staff Reports from Federal Reserve Bank of New York

Abstract: In a simple search model of money, we study a special kind of memory that gives rise to an arrangement resembling a payment network. Specifically, we assume that agents can pay a cost to access a central database that tracks payments made and received. Incentives must be provided to agents to access the central database and to produce when they participate in this arrangement. We also study policies that can loosen these incentive constraints. In particular, we show that a "no-surcharge" rule has good incentive properties. Finally, we compare our model with that of Cavalcanti and Wallace.

Keywords: payment networks; money; search (search for similar items in EconPapers)
JEL-codes: E59 G29 L14 (search for similar items in EconPapers)
Date: 2006-10-01
New Economics Papers: this item is included in nep-dge, nep-mon and nep-net
Note: For a published version of this report, see Antoine Martin, Michael Orlando, and David Skeie, "Payment Networks in a Search Model of Money," Review of Economic Dynamics 11, no. 1 (January 2008): 104-32.
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