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Intensive vs extensive margin tradeoffs in a simple monetary search model

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  • Sébastien Lotz
  • Andrei Shevchenko
  • Christopher Waller

Abstract

We introduce ex-post heterogeneity into monetary search models with lotteries. Heterogeneity allows lotteries over goods to exist in equilibrium. These lotteries over goods create an intensive margin (expected production in a match) that is non-existent in all indivisible goods monetary search models. We then show there can be a tradeoff between the intensive margin and extensive margin (number of matches) when choosing the optimal monetary stock.

Suggested Citation

  • Sébastien Lotz & Andrei Shevchenko & Christopher Waller, 2007. "Intensive vs extensive margin tradeoffs in a simple monetary search model," Annals of Economics and Statistics, GENES, issue 86, pages 139-148.
    • Handle: RePEc:adr:anecst:y:2007:i:86:p:139-148
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