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Title:Wealth as a signal in the search model of money PDF Logo
Authors:Okumura, Tsunao
Issue Date:2005
Series/Report no.:Discussion paper // Center for Mathematical Studies in Economics and Management Science 1401
Abstract:This paper investigates the possibility that wealth (holdings of money) serves as a signal of ability to produce high quality products for agents who cannot directly observe the quality of the products. A producer’s wealth may advertise past success in selling products to agents who knew the producer’s ability and thus signal its ability. This analysis shows that such signaling effects may arise in equilibrium and may lead to more unequal distributions of wealth and lower welfare than would otherwise arise.
Subjects:Random matching
Money holdings
Signaling
Distribution of wealth
Welfare
Divisible money
Product quality
JEL:E40
D82
D83
D31
Document Type:Working Paper
Appears in Collections:Discussion Papers, Kellogg School of Management, Northwestern University

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