Incentives, communication, and payment instruments

Edward Prescott and John Weinberg

No 00-11, Working Paper from Federal Reserve Bank of Richmond

Abstract: Alternative payment instruments are studied in an economy with private information, delayed communication, and limited commitment. Attention is restricted to checks and bank drafts, which differ in resource cost and communication characteristics. Checks are less costly but settlement delays create a limited commitment constraint. We find that drafts dominate at low wealths and checks at higher wealths. Applications to 19th century and modern payment systems are discussed.

Keywords: Checks; Payment systems (search for similar items in EconPapers)
Date: 2000
New Economics Papers: this item is included in nep-dge and nep-lab
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Journal Article: Incentives, communication, and payment instruments (2003)
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