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Emergence of Money as a Medium of Exchange: An Experimental Study

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Author Info
John Duffy
Jack Ochs

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Abstract

This paper reports findings from an experiment that implements a search-theoretic model of money as a medium of exchange. The question examined is whether subjects learn to adopt the same commodities as media of exchange that the model predicts will be used in equilibrium. We report that subjects have a strong tendency to play "fundamental" rather than "speculative" strategies even in environments where speculative strategies yield higher payoffs. We examine some possible motivations for subjects' behavior and conclude that subjects are mainly motivated by past payoff experience as opposed to the marketability considerations that the theory emphasizes.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 89 (1999)
Issue (Month): 4 (September)
Pages: 847-877
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Handle: RePEc:aea:aecrev:v:89:y:1999:i:4:p:847-877

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Aiyagari, S Rao & Wallace, Neil, 1991. "Existence of Steady States with Positive Consumption in the Kiyotaki-Wright Model," Review of Economic Studies, Blackwell Publishing, vol. 58(5), pages 901-16, October. [Downloadable!] (restricted)
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  2. Brown, Paul M., 1996. "Experimental evidence on money as a medium of exchange," Journal of Economic Dynamics and Control, Elsevier, vol. 20(4), pages 583-600, April. [Downloadable!] (restricted)
  3. Sethi, Rajiv, 1999. "Evolutionary stability and media of exchange," Journal of Economic Behavior & Organization, Elsevier, vol. 40(3), pages 233-254, November. [Downloadable!] (restricted)
  4. Kehoe, Timothy J & Kiyotaki, Nobuhiro & Wright, Randall, 1993. "More on Money as a Medium of Exchange," Economic Theory, Springer, vol. 3(2), pages 297-314, April.
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  5. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August. [Downloadable!] (restricted)
  6. Marimon, Ramon & McGrattan, Ellen & Sargent, Thomas J., 1990. "Money as a medium of exchange in an economy with artificially intelligent agents," Journal of Economic Dynamics and Control, Elsevier, vol. 14(2), pages 329-373, May. [Downloadable!] (restricted)
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  7. Wright, Randall, 1995. "Search, evolution, and money," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 181-206. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Camera, G. & Noussair, C. & Tucker, S., 2000. "Rate-of-Return Dominance and Efficiency in an Experimental Economy," Purdue University Economics Working Papers 1135, Purdue University, Department of Economics. [Downloadable!]
    Other versions:
  2. Molzon, Robert & Puzzello, Daniela, 2008. "Random Matching and Aggregate Uncertainty," MPRA Paper 8603, University Library of Munich, Germany. [Downloadable!]
  3. John Duffy, 1998. "Monetary theory in the laboratory," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 9-26. [Downloadable!]
  4. Jose Noguera, 2001. "The Appearance of Carriers and the Origins of Money," CERGE-EI Working Papers wp169, The Center for Economic Research and Graduate Education - Economic Institute, Prague. [Downloadable!]
    Other versions:
  5. Susan K. Laury & Charles A. Holt, 2000. "Classroom Games: Making Money," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 205-213, Spring. [Downloadable!] (restricted)
  6. Peter Rupert & Martin Schindler & Andrei Shevchenko & Randall Wright, 2000. "The search-theoretic approach to monetary economics: a primer," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 10-28. [Downloadable!]
  7. Thorsten Hens & Klaus Reiner Schenk-Hoppé & Bodo Vogt, 2003. "On the Micro-foundations of Money: The Capitol Hill Baby-Sitting Co-op," Discussion Papers 03-35, University of Copenhagen. Department of Economics. [Downloadable!]
    Other versions:
  8. John Duffy, 2004. "Agent-Based Models and Human Subject Experiments," Computational Economics 0412001, EconWPA. [Downloadable!]
    Other versions:
  9. John Duffy, 2008. "Macroeconomics: A Survey of Laboratory Research," Working Papers 334, University of Pittsburgh, Department of Economics, revised Mar 2008. [Downloadable!]
  10. Gabriele Camera, 2001. "Search, Dealers, and the Terms of Trade," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(3), pages 680-694, July. [Downloadable!] (restricted)
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