This paper contributes to the micro-foundation of money in centralized markets with idiosyncratic uncertainty. It shows existence of stationary monetary equilibria and ensures that there is an optimum quantity of money. The rational solution of our model is compared with actual behavior in a laboratory experiment. The experiment gives support to the theoretical approach.
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Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number
03-35.
Length: 20 pages Date of creation: Jun 2003 Date of revision: Handle: RePEc:kud:kuiedp:0335
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Find related papers by JEL classification: C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
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