The Coordination Value of Monetary Exchange: Experimental Evidence
AbstractA new behavioral foundation is uncovered for why money promotes impersonal exchange. In an experiment, subjects could cooperate by intertemporally exchanging goods with anonymous opponents met at random. Indefinite repetition supported multiple equilibria, from full defection to the efficient outcome. Introducing the possibility to hold and exchange intrinsically worthless tickets affected outcomes and cooperation patterns. Tickets resembled fiat money, which emerged as a tool for equilibrium selection in the economy. Monetary exchange facilitated coordination on cooperation and redistributed surplus from defectors to cooperators. Treatments where subjects could develop a reputation revealed a limited record-keeping role for monetary exchange.
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Bibliographic InfoPaper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number 1239.
Date of creation: Aug 2010
Date of revision:
money; cooperation; information; trust; folk theorem; repeated games;
Other versions of this item:
- Gabriele Camera & Marco Casari, 2014. "The Coordination Value of Monetary Exchange: Experimental Evidence," American Economic Journal: Microeconomics, American Economic Association, vol. 6(1), pages 290-314, February.
- G. Camera & M. Casari, 2011. "The coordination value of monetary exchange: Experimental evidence," Working Papers wp754, Dipartimento Scienze Economiche, Universita' di Bologna.
- C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-03 (All new papers)
- NEP-CBA-2010-09-03 (Central Banking)
- NEP-CBE-2010-09-03 (Cognitive & Behavioural Economics)
- NEP-EXP-2010-09-03 (Experimental Economics)
- NEP-HPE-2010-09-03 (History & Philosophy of Economics)
- NEP-MON-2010-09-03 (Monetary Economics)
- NEP-SOC-2010-09-03 (Social Norms & Social Capital)
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