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Money is an Experience Good: Competition and Trust in the Private Provision of Money

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ECO_2011_24.pdf (249.62 KB)
EUI ECO 2011/24
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https://hdl.handle.net/1814/17714
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1725-6704
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2011
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Working Paper
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Currency competition; Trust; Inflation; Sustainable Equilibrium; Experience goods; E40; E50; E58; E60
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http://hdl.handle.net/1814/31177
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EUI ECO; 2011/24
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MARIMON, Ramon, NICOLINI, Juan Pablo, TELES, Pedro, Money is an Experience Good: Competition and Trust in the Private Provision of Money, EUI ECO, 2011/24 - https://hdl.handle.net/1814/17714
Abstract
We study the interplay between competition and trust as efficiency-enhancingmechanims in the private provision of money. With commitment, trust is automatically achieved and competition ensures efficiency. Without commitment, competition plays no role. Trust does play a role but requires a bound on efficiency. Stationary inflation must be non-negative and, therefore, the Friedman rule cannot be achieved. The quality of money can only be observed after its purchasing capacity is realized. In that sense money is an experience good.
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