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Tao Peng
 
''A Note on the implementation of the Pareto efficient allocation in the Lagos-Wright model''
( 2012, Vol. 32 No.1 )
 
 
This note modifies Lagos – 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.
 
 
Keywords: The Friedman rule, Pareto efficient allocations, Subsidies
JEL: E0 - Macroeconomics and Monetary Economics: General
 
Manuscript Received : Aug 29 2010 Manuscript Accepted : Jan 09 2012

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