Payment Networks in a Search Model of Money

Antoine Martin, Michael J. Orlando, David R. Skeie
2006 Social Science Research Network  
In a simple search model of money, we study a special kind of memory which gives rise to an arrangement resembling a payment network. Specifically, we assume that agents can choose to have access to a central data base which keeps track of payments made and received. We show that multiple equilibria can arise because of a network effect and we study policies that can help eliminate the equilibrium with low access. We also study policies that can loosen the participation constraint. Finally, we
more » ... raint. Finally, we compare our model with the model of Cavalcanti and Wallace (1999 a and b).
doi:10.2139/ssrn.941696 fatcat:g7fszgrphbeonbd54mfjz4uinq