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Monetary Trading: An Optimal Exchange System

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  • Carmona, Guilherme

Abstract

We show that monetary trading is simple, self-enforcing, symmetric, and irreducible in a natural framework. Furthermore, we will show that the utility for each economic agent is at least as big under the monetary system as under any other simple, self-enforcing, symmetric, and irreducible trading system of the same complexity. Thus, we rationalize the monetary nature of real-world trade as being an efficient way to achieve those properties.

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File URL: http://fesrvsd.fe.unl.pt/WPFEUNL/WP2002/wp420.pdf
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Bibliographic Info

Paper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp420.

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Length: 28 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:unl:unlfep:wp420

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  1. Kocherlakota, Narayana R., 1998. "Money Is Memory," Journal of Economic Theory, Elsevier, vol. 81(2), pages 232-251, August.
  2. Guilherme Carmona, 2004. "Social Norms and Monetary Trading," Macroeconomics 0402030, EconWPA.
  3. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May.
  4. 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.
  5. Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1995. "Social Norms and Random Matching Games," Games and Economic Behavior, Elsevier, vol. 9(1), pages 79-109, April.
  6. Neil Wallace, 1997. "Absence-of-double-coincidence models of money: a progress report," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-20.
  7. Ellison, Glenn, 1994. "Cooperation in the Prisoner's Dilemma with Anonymous Random Matching," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 567-88, July.
  8. MERTENS, Jean-François, . "Stochastic games," CORE Discussion Papers RP -1587, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  10. Kocherlakota, Narayana & Wallace, Neil, 1998. "Incomplete Record-Keeping and Optimal Payment Arrangements," Journal of Economic Theory, Elsevier, vol. 81(2), pages 272-289, August.
  11. Ariel Rubinstein, 1997. "Finite automata play the repeated prisioners dilemma," Levine's Working Paper Archive 1639, David K. Levine.
  12. Champ,Bruce & Freeman,Scott & Haslag,Joseph, 2011. "Modeling Monetary Economies," Cambridge Books, Cambridge University Press, number 9781107003491, October.
  13. P. D., 1988. "Introduction," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 10(4), pages 527, July.
  14. Kandori, Michihiro, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 63-80, January.
  15. Townsend, Robert M, 1987. "Economic Organization with Limited Communication," American Economic Review, American Economic Association, vol. 77(5), pages 954-71, December.
  16. David B. Humphrey & Lawrence B. Pulley & Jukka M. Vesala, 1996. "Cash, paper, and electronic payments: a cross-country analysis," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 914-941.
  17. Joao Gata, . "Repeated Random Matching Games under Restricted Information. Part I: Equilibria," Discussion Papers 95/19, Department of Economics, University of York.
  18. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
  19. Humphrey, David B & Pulley, Lawrence B & Vesala, Jukka M, 1996. "Cash, Paper, and Electronic Payments: A Cross-Country Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 914-39, November.
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Cited by:
  1. Carmona, Guilherme & Leoni, Patrick, 2003. "Equilibrium Non-Panic Bank Failures," FEUNL Working Paper Series wp424, Universidade Nova de Lisboa, Faculdade de Economia.

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