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Anonymous Markets and Monetary Trading

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  • Aliprantis, C.D.
  • Camera, Gabriele
  • Puzzello, D.

Abstract

We study an infinite-horizon economy with two basic frictions that are typical in monetary models. First, agents’ trading paths cross at most once due to pairwise trade and other meeting obstacles. Second, actions must be compatible with individual incentives due to commitment and enforcement limitations. We find that, with patient agents, relaxing the first friction by introducing centralized markets, opens the door to an informal enforcement scheme sustaining a non-monetary efficient allocation. Hence, we present a matching environment in which agents repeatedly access large markets and yet the basic frictions are retained. This allows the construction of models based on competitive markets in which money plays an essential role.

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Bibliographic Info

Paper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number 1179.

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Length: 32 pages
Date of creation: Oct 2005
Date of revision:
Handle: RePEc:pur:prukra:1179

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Keywords: Money ; Infinite games ; Matching models ; Social norms;

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References

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  8. Al-Najjar, Nabil I. & Smorodinsky, Rann, 2001. "Large Nonanonymous Repeated Games," Games and Economic Behavior, Elsevier, Elsevier, vol. 37(1), pages 26-39, October.
  9. Boel, Paola & Camera, Gabriele, 2004. "Efficient Monetary Allocations and the Illiquidity of Bonds," Purdue University Economics Working Papers, Purdue University, Department of Economics 1171, Purdue University, Department of Economics.
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  23. Araujo, Luis, 2004. "Social norms and money," Journal of Monetary Economics, Elsevier, Elsevier, vol. 51(2), pages 241-256, March.
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