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Is Nonprice Competition in Currency Inefficient?

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  • White, Lawrence H
  • Boudreaux, Donald J

Abstract

Some economists believe that the competitive survival of noninterest-bearing currency--the absence of price competition from markets for stored-value cards, banknotes, and token coins--implies a waste of resources on nonprice competition. The authors argue to the contrary that market forces drive issuers toward an efficient mix of price and nonprice competition. Where economic costs (rather than legal restrictions) rule out the delivery of interest on currency, competition exclusively along nonprice dimensions is consistent with efficiency. The authors graphically illustrate such a case.

Suggested Citation

  • White, Lawrence H & Boudreaux, Donald J, 1998. "Is Nonprice Competition in Currency Inefficient?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(2), pages 252-260, May.
    • Handle: RePEc:mcb:jmoncb:v:30:y:1998:i:2:p:252-60
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    Cited by:

    1. William D. Lastrapes & George Selgin, 2012. "Banknotes And Economic Growth," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(4), pages 390-418, September.
    2. Lawrence H. White, 2022. "The private mint in economics: evidence from the American gold rushes," Economic History Review, Economic History Society, vol. 75(1), pages 3-21, February.
    3. Rebeca Juan, 2008. "Competition in Local Markets: Some Evidence from the Spanish Retail Banking Market," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 32(2), pages 145-162, March.

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