Incentives, communication, and payment instruments

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...

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Bibliographic Details
Published in:Journal of monetary economics 2003-03, Vol.50 (2), p.433-454
Main Authors: Simpson Prescott, Edward, Weinberg, John A
Format: Article
Language:English
Subjects:
Checks
Communication
Drafts
Economic models
Economic theory
Economics
Finance
Incentives
Monetary economics
Payments
Studies
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Summary: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.
ISSN:0304-3932
1873-1295
DOI:10.1016/S0304-3932(03)00009-6