Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/189333 
Year of Publication: 
2006
Series/Report no.: 
Queen's Economics Department Working Paper No. 1053
Publisher: 
Queen's University, Department of Economics, Kingston (Ontario)
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: 
Payment Systems
Settlement
Mechanism Design
JEL: 
E40
D02
D82
C73
Document Type: 
Working Paper

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