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Counterfeiting as Private Money in Mechanism Design
Author(s) -
CAVALCANTI RICARDO,
NOSAL ED
Publication year - 2011
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2011.00456.x
Subject(s) - appeal , mechanism (biology) , currency , lottery , imperfect , matching (statistics) , monetary economics , mechanism design , imperfect competition , competition (biology) , business , economics , microeconomics , commerce , law , mathematics , ecology , philosophy , linguistics , statistics , epistemology , political science , biology
We describe counterfeiting activity as the issuance of private money, one that is difficult to monitor. Our approach, which amends the basic random‐matching model of money in mechanism design, allows a tractable welfare analysis of currency competition. We show that it is not efficient to eliminate counterfeiting activity completely. We do not appeal to lottery devices, and we argue that this is consistent with imperfect monitoring.