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The Theory of Money and Financial Institutions: A Summary of a Game Theoretic Approach

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Author Info
Martin Shubik () (Cowles Foundation, Yale University)

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Abstract

A game theoretic approach to the theory of money and financial institution is given utilizing both the strategic and coalitional forms for describing the economy. The economy is first modeled as a strategic market game, then the strategic form is used to calculate several cooperative forms that differ from each other in their utilization of money and credit and their treatment of threats. It is shown that there are natural upper and lower bounds to the monetary needs of an economy, but even in the extreme structures the concept of "enough money" can be defined usefully, and for large economies the games obtained from the lower and upper bounds have cores that approach the same limit that is an efficient price system. The role of disequilibrium is then discussed.

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File URL: http://cowles.econ.yale.edu/P/cd/d15b/d1572.pdf
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Publisher Info
Paper provided by Cowles Foundation, Yale University in its series Cowles Foundation Discussion Papers with number 1572.

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Length: 21 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:cwl:cwldpp:1572

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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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Related research
Keywords: Money; Prices; Core; Threat; Market game; Strategic market game;

Other versions of this item:

Find related papers by JEL classification:
C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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References listed on IDEAS
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. Dubey, Pradeep & Mas-Colell, Andreau & Shubik, Martin, 1980. "Efficiency properties of strategies market games: An axiomatic approach," Journal of Economic Theory, Elsevier, vol. 22(2), pages 339-362, April. [Downloadable!] (restricted)
  2. Geanakoplos, John & Mas-Colell, Andreu, 1989. "Real indeterminacy with financial assets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 22-38, February. [Downloadable!] (restricted)
  3. Shapley, Lloyd S & Shubik, Martin, 1977. "Trade Using One Commodity as a Means of Payment," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 937-68, October. [Downloadable!] (restricted)
  4. Dubey, Pradeep & Neyman, Abraham, 1984. "Payoffs in Nonatomic Economies: An Axiomatic Approach," Econometrica, Econometric Society, vol. 52(5), pages 1129-50, September. [Downloadable!] (restricted)
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  5. Shubik, Martin, 1996. "Why equilibrium? A note on the noncooperative equilibria of some matrix games," Journal of Economic Behavior & Organization, Elsevier, vol. 29(3), pages 537-539, May. [Downloadable!] (restricted)
  6. Starr, Ross M, 1976. "Decentralized Nonmonetary Trade," Econometrica, Econometric Society, vol. 44(5), pages 1087-89, September. [Downloadable!] (restricted)
  7. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April. [Downloadable!] (restricted)
  8. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-31, March. [Downloadable!] (restricted)
  9. Martin Shubik & D.P. Tsomocos, 1993. "A Strategic Market Game with Seigniorage Costs of Fiat Money," Cowles Foundation Discussion Papers 1043, Cowles Foundation, Yale University. [Downloadable!]
  10. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April. [Downloadable!] (restricted)
  11. 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)
  12. Martin Shubik & Ludo Van der Heyden, 1977. "Logrolling and Budget Allocation Games," Cowles Foundation Discussion Papers 445, Cowles Foundation, Yale University. [Downloadable!]
  13. Magill, Michael & Shafer, Wayne, 1991. "Incomplete markets," Handbook of Mathematical Economics, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 30, pages 1523-1614 Elsevier. [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. Xiong, Siyang & Zheng, Charles Zhoucheng, 2008. "Interactive Blocking in Arrow-Debreu Economies," Staff General Research Papers 12882, Iowa State University, Department of Economics. [Downloadable!]
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