Counterfeiting as Private Money in Mechanism Design

Rocheteau, Guillaume; Nosal, Ed

doi:10.26509/frbc-wp-200716

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Counterfeiting as Private Money in Mechanism Design

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We describe counterfeiting activity as the issuance of private money, one which is diffi cult 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 eliminate counterfeiting activity completely. We do not appeal to lottery devices, and we argue that this is consistent with imperfect monitoring.

11.01.2007WP 07-16DOI 10.26509/frbc-wp-200716

Keywords counterfeiting, private money, imperfect monitoring, mechanism design

JEL Classification Codes E4, E5

Suggested Citation

Rocheteau, Guillaume, and Ed Nosal. 2007. “Counterfeiting as Private Money in Mechanism Design.” Federal Reserve Bank of Cleveland, Working Paper No. 07-16. https://doi.org/10.26509/frbc-wp-200716

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