Search Results
Journal Article
Monetary theory and electronic money : reflections on the Kenyan experience
This article uses a class of models of money and the payments system to inform an analysis of "mobile banking" in the context of the rapid expansion of M-PESA, a new technology in Kenya that allows payments via mobile phones (even without any access to a bank account), and currently reaches close to 38 percent of Kenyan adults. The separation of households and firms in space and time suggests, in theory, from various separate models, a number of implications. These include (i) the potential gain, under some circumstances, from allowing net e-money credit creation, (ii) the impact that the ...
Working Paper
Firms as clubs in Walrasian markets with private information : technical appendix
This paper proves the Welfare Theorems and the existence of a competitive equilibrium for the club economies with private information in Prescott and Townsend (2005). The proofs cover lottery economies with a finite number of goods and without free disposal. A mapping based on Negishi (1960) is used.
Working Paper
Firms as clubs in Walrasian markets with private information
Using private information and club theories, this paper develops a theory of firms in general equilibrium. Firms are defined to be assignments of technologies and agents to clubs. In equilibrium, firms form endogenously and multiple types may co-exist. We formulate the general equilibrium problem as both a Pareto program and as a competitive equilibrium. Welfare and existence theorems are provided. In the competitive equilibrium, club memberships are priced and purchased, so the market determines which organizations exist as well as who is a member. Pareto optima and competitive equilibria of ...
Report
Optimal Design of Tokenized Markets
Trades in today’s financial system are inherently subject to settlement uncertainty. This paper explores tokenization as a potential technological solution. A token system, by enabling programmability of assets, can be designed to eradicate settlement uncertainty. We study the allocations achieved in a decentralized market with either the legacy settlement system or a token system. Tokenization can improve efficiency in markets subject to a limited commitment problem. However, it also materially alters the information environment, which in turn aggravates a hold-up problem. This limits ...
Working Paper
Mechanism design and assignment models
This mechanism design paper studies the assignment of people to projects over time. Inability to communicate interim shocks is a force for long-term assignments, though exceptions exist for high risk aversion. In contrast, costless reporting of interim shocks makes switching powerful for virtually all environments. Switching elicits honest reports and mitigates incentive constraints allowing, in particular, beneficial concealment of project quality. Properties of the production technology are also shown to matter. Substitutability of intertemporal effort is a force for long-term assignments ...
Journal Article
Formal and informal financing in a Chicago neighborhood
This article documents not only the actual use of banks, but also the widespread use of alternative financing mechanisms, using data from a survey of households and businesses in a Hispanic neighborhood of Chicago.
Report
Optimal contracts and competitive markets with costly state verification
This paper focuses on avoidable moral hazard and offers one explanation for limited insurance markets, for closely held firms, and for seemingly simple as opposed to contingent forms of debt. Agents have random endowments of a consumption good which are such that there are gains to trading contingent claims. But any realization of an endowment is known only by its owner unless a verification cost is borne. Contracts in such a setting are said to be consistent if agents submit to verification and honor claims in accordance with prior agreements. The Pareto optimal consistent contracts which ...
Report
A model of circulating private debt
We study the possible specialness of circulating as opposed to noncirculating private securities using models whose equilibria imply the existence of both. The models are pure exchange setups with spatial separation and with the potential for a variety of intertemporal trades. We find a sense in which unregulated circulating private securities are troublesome. It can happen that in order for an equilibrium to exist, the amounts of circulating debts issued at the same time in spatially and informationally separated markets have to satisfy restrictions not implied by individual maximization and ...