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Money, Search, And Costly Matchmaking

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  • Camera, Gabriele

Abstract

I examine the robustness of monetary equilibriain a random-matching model, where a more efficient mechanismfor trade is available. Agents choose between two tradingsectors: the search and the intermediated sector. In theformer, trade partners arrive randomly and there is atrading externality. In the latter, a costly matchingtechnology provides deterministic double-coincidencematches. Multiple equilibria exist with the extent of costlymatching endogenously determined. Money and mediated trademay coexist. This depends on the size of the probability ofa trade, relative to the cost of deterministic matching.This outcome is inferior for an increasing-returnsexternality. Under certain conditions, regimes with onlycostly matching are welfare superior to monetary regimeswith random matching.

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Bibliographic Info

Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 4 (2000)
Issue (Month): 03 (September)
Pages: 289-323

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Handle: RePEc:cup:macdyn:v:4:y:2000:i:03:p:289-323_01

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Cited by:
  1. Mark Pingle & Sankar Mukhopadhyay, 2008. "Private Money as a Competing Medium of Exchange," Working Papers 08-004, University of Nevada, Reno, Department of Economics & University of Nevada, Reno , Department of Resource Economics.
  2. Antoine Martin & Michael Orlando & David Skeie, 2008. "Payment networks in a search model of money," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 104-132, January.
  3. Godfrey Keller & Kevin Roberts & Margaret Stevens, 2007. "Unemployment, Participation and Market Size," Economics Series Working Papers 362, University of Oxford, Department of Economics.
  4. Camera, Gabriele, 2001. "Dirty money," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 377-415, April.
  5. D. Aliprantis, C. & Camera, G. & Puzzello, D., 2007. "Anonymous markets and monetary trading," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1905-1928, October.

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