The model contains light and heavy coins, imperfect information, and prices determined via bilateral bargaining. There are equilibria with neither, both, or only one type of coin in circulation. When both circulate, coins may trade by weight or by tale. We discuss the extent to which Gresham's Law holds in the various cases. Following a debasement, the quantity of reminting depends on the incentives o ered by the sovereign.
Equilibria exist with positive seigniorage and a mixture of old and new coins in circulation.
The views expressed here are those of the authors and not necessarily those of the Federal Reserve Banks of Minneapolis or Chicago or the Federal Reserve System. We thank Arthur Fishman, Angela Redish, Thomas Sargent, Theodosios Temzelides, and seminar participants at the Federal Reserve Banks of Minneapolis and Philadelphia, the Penn Macro Lunch Group, the Universities of Chicago, Essex, Cambridge and Haifa, and the 1996 SEDC conference in Mexico City. For further information, see instructions for using Adobe Acrobat files.