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Bargains, Barter and Money

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  • Merwan Engineer

    (University of Victoria)

  • Shouyong Shi

    (Queen's University)

Abstract

We examine a search money model in which there is a symmetric coincidence of wants in all barter matches. However, when bargaining outcomes are asymmetric across matches, the barter economy is inefficient. Then a robust monetary equilibrium exists provided that money holders enjoy adequate bargaining terms. Fiat money may be welfare inproving. In contrast to the literature, it is the assymmetry in bargains across matches rather than asymmetry in demands that generates these results. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.2000.0107
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 4 (2001)
Issue (Month): 1 (January)
Pages: 188-209

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Handle: RePEc:red:issued:v:4:y:2001:i:1:p:188-209

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Related research

Keywords: bargaining; barter; fiat; money; search;

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References

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  1. Belk, Russell W. & Wallendorf, Melanie, 1990. "The sacred meanings of money," Journal of Economic Psychology, Elsevier, Elsevier, vol. 11(1), pages 35-67, March.
  2. Williamson, Steve & Wright, Randall, 1994. "Barter and Monetary Exchange under Private Information," American Economic Review, American Economic Association, American Economic Association, vol. 84(1), pages 104-23, March.
  3. Binmore, Ken, et al, 1993. "Focal Points and Bargaining," International Journal of Game Theory, Springer, Springer, vol. 22(4), pages 381-409.
  4. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  5. Wolinsky, Asher, 1987. "Matching, search, and bargaining," Journal of Economic Theory, Elsevier, Elsevier, vol. 42(2), pages 311-333, August.
  6. Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, American Economic Association, vol. 83(1), pages 63-77, March.
  7. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(4), pages 927-54, August.
  8. Shouyong Shi, 1995. "Money and Prices: A Model of Search and Bargaining," Working Papers, Queen's University, Department of Economics 916, Queen's University, Department of Economics.
  9. Kiyotaki, Nobuhiro & Wright, Randall, 1991. "A contribution to the pure theory of money," Journal of Economic Theory, Elsevier, Elsevier, vol. 53(2), pages 215-235, April.
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Cited by:
  1. Dutu, Richard, 2008. "Currency interdependence and dollarization," Journal of Macroeconomics, Elsevier, Elsevier, vol. 30(4), pages 1673-1687, December.
  2. 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, Federal Reserve Bank of Cleveland, issue Q IV, pages 10-28.

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