A Note on the implementation of the Pareto efficient allocation in the Lagos-Wright model

This note modifies Lagos â€“ Wright (2005) by adding subsidies to sellers. We show that this modification can result in a Pareto efficient allocation at the Friedman rule when buyers do not have all the bargaining power. We find that the optimal rate of subsidy is increasing in buyers' relative risk aversion coefficient.

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Year of publication:	2012
Authors:	Peng, Tao
Published in:	Economics Bulletin. - AccessEcon, ISSN 1545-2921. - Vol. 32.2012, 1, p. 27-36
Publisher:	AccessEcon
Subject:	The Friedman rule \| Pareto efficient allocations \| Subsidies

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Extent:	application/pdf
Type of publication:	Article
Classification:	E0 - Macroeconomics and Monetary Economics. General
Source:	RePEc - Research Papers in Economics

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