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Money and information

Berentsen, Aleksander; Rocheteau, Guillaume

Description

This paper investigates the role of money in markets in which producers have private information about the quality of the goods they supply. When the fraction of high-quality producers in the economy is given, money promotes the production of high-quality goods, which improves the quality mix and welfare unambiguously. When this fraction is endogenous, however, we find that money can decrease welfare relative to the barter equilibrium. The origin of this inefficiency is that money provides...[Show more]

CollectionsANU Research Publications
Date published: 2004
Type: Journal article
URI: http://hdl.handle.net/1885/78719
Source: Review of Economic Studies
DOI: 10.1111/j.1467-937X.2004.00309.x

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