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A model of money counterfeits
JournalArticle (Originalarbeit in einer wissenschaftlichen Zeitschrift)
 
ID 109298
Author(s) Lengwiler, Y
Author(s) at UniBasel Lengwiler, Yvan
Year 1997
Title A model of money counterfeits
Journal Journal of economics
Volume 65
Number 2
Pages / Article-Number 123-132
Keywords counterfeiting, face value of bank notes, central banks, subgame perfect equilibrium
Abstract

This note offers a game-theoretic analysis of the strategic interaction between a central bank and a counterfeiter. Counterfeit notes cause a potential loss for consumers because such notes are confiscated when detected. The central bank is assumed to choose a bank note design that minimizes the sum of the production cost of the notes and of the expected loss to the non-counterfeiting part of the population. The counterfeiter maximizes his expected return. I find that this game has a pure strategy subgame perfect equilibrium, and this equilibrium is typically unique. Depending on parameter values (specifically on the face values of notes), there is either no counterfeiting or much counterfeiting in equilibrium. Intermediate cases are never an equilibrium.

Publisher Springer
ISSN/ISBN 0931-8658
edoc-URL http://edoc.unibas.ch/dok/A5253742
Full Text on edoc No
Digital Object Identifier DOI 10.1007/BF01226930
ISI-Number WOS:A1997WX91100001
Document type (ISI) ArticleProceedings Paper
 
   

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