Wang, Liang; Wright, Randall D.; Liu, Lucy Qian - 2017
We develop a theory of money and credit as competing payment instruments, then put it to work in applications. Buyers … can use cash or credit, with the former (latter) subject to the inflation tax (transaction costs). Frictions that make the … choice of payment method interesting also imply equilibrium price dispersion. We deliver closed-form solutions for money …