Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153038
Authors: 
Koeppl, Thorsten Volker
Monnet, Cyril
Temzelides, Ted
Year of Publication: 
2006
Series/Report no.: 
ECB Working Paper 604
Abstract: 
We investigate the role of settlement in a dynamic model of a payment system where the ability of participants to perform certain welfare-improving transactions is subject to random and unobservable shocks. In the absence of settlement, the full information first-best allocation cannot be supported due to incentive constraints. In contrast, this allocation is supportable if settlement is introduced. This, however, requires that settlement takes place with a sufficiently high frequency.
Subjects: 
Intertemporal Incentives
payments
settlement
JEL: 
E4
E5
Document Type: 
Working Paper

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