The Lagos-Wright model a monetary model in which pairwise meetings alternate in time with a centralized meeting has been extensively analyzed, but always using particular trading protocols. Here, trading protocols are replaced by two alternative notions of implementability: one that allows only individual defections and one that also allows cooperative defections in meetings. It is shown that the rst-best allocation is implementable under the stricter notion without taxation if people are su ciently patient. And, if people are free to skip the centralized meeting, then lump-sum taxation used to pay interest on money does not enlarge the set of implementable allocations. (100 words)

This paper provides a theory of dynamic intermediation in over-the-counter markets. Intermediation arises so agents that meet infrequently can trade risky assets without collateral. When meeting the same counterparty again is unlikely, an agent develops a long-term relationship with another trader who then acts as an intermediary. In a relationship, two traders condition the terms of trade on information about past transactions. A trade-o¤ exists between forming many relationships and trading through intermediaries. First, maintaining relationships is costly. Second, agents intermediating transactions between others require a fee. I show that in equilibrium one agent intermediates all the trade in the market.

No abstract

No abstract

We characterize the equilibrium set of a two-good, pure-credit economy with limited commitment, under both pairwise and centralized meetings. We show that the set of equilibria derived under "not-tootight" solvency constraints (Alvarez and Jermann, 2000) commonly used in the literature is of measure zero in the whole set of Perfect Bayesian Equilibria. There exist a continuum of stationary equilibria, a continuum of endogenous credit cycles of any periodicity, and a continuum of sunspot equilibria, irrespective of the assumed trading mechanism. Equilibria featuring "too-tight" solvency constraints can generate growing credit limits over time, periodic credit shutdowns, and heterogeneous debt limits across ex-ante identical borrowers. Moreover, we provide examples of credit cycles that dominate, from a social welfare point of view, all equilibria with "not-too-tight" solvency constraints.