This paper develops a model of currency circulation under asymmetric information. Agents are heterogeneous and trade in bilateral matches. Coins are intrinsically valuable and are available in two weights, light and heavy. We characterize the equilibrium under complete information and under...

Observing the current wage at a job may not fully reflect the value of that job. For example, a job with a low starting wage may be preferred to a high starting wage job if the growth rate of wages in the former exceeds the latter. In fact, differences in wage growth can potentially explain why...

Chapter 11 structures complex negotiations between creditors and debtors that are overseen by a bankruptcy court. This paper identifies conditions under which it is optimal for the court to sometimes err in determining whether a firm should be liquidated. Such errors can affect the optimal...

In the standard principal-agent model, the information structure is fixed. In this paper the author allows the principal to choose his level of informedness before he contracts with the agent. During the contracting phase, the agent never learns what the principal knows about the state of the...

Green and Lin study a version of the Diamond-Dybvig model with a finite number of agents, independence (independent determination of each agent's type), and sequential service. For special preferences, they show that the ex ante first-best allocation is the unique equilibrium outcome of the...

We modify the Diamond-Dybvig model studied in Green and Lin to incorporate a self-interested banker who has a private record-keeping technology. A public record-keeping device does not exist. We find that there is a trade-off between sophisticated contracts that possess relatively good...

We study the consequences of the introduction of widespread limited liability for corporations. In the traditional view, limited liability reduces transactions costs and enhances investment incentives for individuals and firms. But this view does not explain several important stylized facts of...

The authors construct a simple environment that combines a limited communication friction and a limited information friction in order to generate a role for money and intermediation. The authors ask whether there is any reason to expect the emergence of a banking sector (i.e., institutions that...

We describe counterfeiting activity as the issuance of private money, one which is difficult to monitor. Our approach, which amends the basic random-matching model of money in mechanism design, allows a tractable welfare analysis of currency competition. We show that it is not efficient to...

A simple matching-model of money with the potential for counterfeiting is constructed. In contrast to the existing literature, counterfeiting, if it occurred, would be accompanied by two distortions: costly production of counterfeits and harmful effects on trade. However, application of the...