Incentives, Communication, and Payment Instruments
Article
Incentives, Communication, and Payment Instruments
Incentives, Communication, and Payment Instruments
Incentives, Communication, and Payment Instruments
00-11
2000-11-01
Edward S. Prescott {edwpre1}
John A. Weinberg {johwei1}
<p>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.</p>
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Payments & Policy
1
Payments
<p>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.</p>
Working Paper Series
00-11
2000-11-01