On the welfare effects of credit arrangements. (English) Zbl 1417.91198
Summary: This article studies the welfare effects of credit arrangements and how these effects depend on the trading mechanism and inflation. In a competitive market, credit arrangements can be welfare reducing, because high consumption by credit users drives up the price level, reducing consumption by money users who are subject to a binding liquidity constraint. By adopting an optimal trading mechanism, however, these welfare implications can be overturned. Both price discrimination and nonlinear pricing are essential features of an optimal mechanism.
MSC:
| 91B15 | Welfare economics |
| 91B60 | Trade models |
| 91B64 | Macroeconomic theory (monetary models, models of taxation) |
Keywords:
welfare effects; credit arrangements; trading mechanism; inflation; price discrimination; nonlinear pricingReferences:
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