A model of (the threat of) counterfeiting

Ed Nosal, Neil Wallace

Research output: Contribution to journalArticlepeer-review

44 Scopus citations


A simple matching-model of money with the potential for counterfeiting is constructed. In contrast to the existing literature, lotteries are included. These provide scope for the operation of the intuitive criterion of Cho and Kreps. The application of that refinement is shown to imply that there is no equilibrium with counterfeiting. If the cost of producing counterfeits is low enough, then there is no monetary equilibrium. Otherwise, there is a monetary equilibrium without counterfeiting. In other words, the threat of counterfeiting can eliminate the monetary equilibrium.

Original languageEnglish (US)
Pages (from-to)994-1001
Number of pages8
JournalJournal of Monetary Economics
Issue number4
StatePublished - May 2007

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


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