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Money, Payments, and Liquidity$
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Ed Nosal and Guillaume Rocheteau

Print publication date: 2011

Print ISBN-13: 9780262016285

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262016285.001.0001

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Pure Credit Economies

Pure Credit Economies

Chapter:
(p.20) (p.21) 2 Pure Credit Economies
Source:
Money, Payments, and Liquidity
Author(s):

Ed Nosal

Guillaume Rocheteau

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262016285.003.0002

This chapter examines pure credit economies. It first focuses on the conditions needed for bilateral credit to be feasible. It also examines a set of socially desirable allocations that can be obtained, and the ones that are exactly feasible. Four related environments that can support credit arrangements are considered. Each environment differs from the other in terms of the amount of commitment, or trust, that agents possess, and the punishments that can be imposed on a debtor that tries to evade his payment obligations. The four credit economies that are observed are credit with commitment, credit default, credit with public record keeping, and credit with reputation.

Keywords:   credit economies, bilateral credit, credit with commitment, credit default, credit with public record keeping, credit with reputation

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