This paper studies the existence of single-price price equilibrium from a given initial distribution of money holdings in a search-theoretic model of money where agents have no time preference. The model is similar to the authors' recent models of search economies with no constraints on money inventories, except that here money is modeled as indivisible and traders are assumed to have overtaking-criterion preferences rather than discounting. The equilibrium concept is dynamic equilibrium from an initial distribution of money holdings rather than steady-state equilibrium (which possibly might not be reachable from an initial state) which was studied earlier. In this environment, under some mild conditions on the initial distribution, single-price equilibrium always exists. More precisely, there is an equilibrium path, along which agents trade at the same price, and the money-holdings distribution converges asymptotically to a unique geometric distribution.
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Paper provided by EconWPA in its series Macroeconomics with number
9902010.
Find related papers by JEL classification: D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
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.:
Itzhak Gilboa & Akihiko Matsui, 1990.
"A Model of Random Matching,"
Discussion Papers
887, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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