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The Coordination Value of Monetary Exchange: Experimental Evidence

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  • Gabriele Camera
  • Marco Casari

Abstract

What institutions can sustain cooperation in groups of strangers? Here we study the role of monetary systems. In an experiment, subjects sometimes needed help and sometimes could incur a cost to help an anonymous counterpart. In the absence of money, the intertemporal exchange of help, which could be supported by a norm of community punishment of defectors, did not emerge. Introducing intrinsically worthless tokens substantially altered patterns of behavior. Monetary trade emerged, which increased predictability of play and promoted cooperation when strangers could trade help for a token.

Suggested Citation

  • 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.
  • Handle: RePEc:aea:aejmic:v:6:y:2014:i:1:p:290-314
    Note: DOI: 10.1257/mic.6.1.290
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Davis, Douglas & Korenok, Oleg & Norman, Peter & Sultanum, Bruno & Wright, Randall, 2019. "Playing with Money," Working Paper 19-2, Federal Reserve Bank of Richmond.
    2. Gabriele Camera & Dror Goldberg & Avi Weiss, 2016. "Endogenous Market Formation and Monetary Trade: an Experiment," Working Papers 16-19, Chapman University, Economic Science Institute.
    3. Baeriswyl Romain & Cornand Camille, 2018. "The distortionary effect of monetary policy: credit expansion vs. lump-sum transfers in the lab," The B.E. Journal of Macroeconomics, De Gruyter, vol. 18(2), pages 1-30, June.
    4. repec:aea:aejmic:v:11:y:2019:i:1:p:1-43 is not listed on IDEAS
    5. Maria Bigoni & Gabriele Camera & Marco Casari, 2014. "Money is More than a Memory," Working Papers 14-17, Chapman University, Economic Science Institute.
    6. Camera, Gabriele & Gioffré, Alessandro, 2014. "Game-theoretic foundations of monetary equilibrium," Journal of Monetary Economics, Elsevier, vol. 63(C), pages 51-63.
    7. Luis Araujo & Bernardo Guimaraes, 2017. "A Coordination Approach to the Essentiality of Money," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 14-24, March.
    8. Daniela Puzzello & Brit Grosskpof & John Duffy, 2011. "Gift Exchange versus Monetary Exchange: Experimental Evidence," 2011 Meeting Papers 1153, Society for Economic Dynamics.
    9. Gabriele Camera & Marco Casari, 2018. "Monitoring institutions in indefinitely repeated games," Experimental Economics, Springer;Economic Science Association, vol. 21(3), pages 673-691, September.
    10. Gabriele Camera, 2016. "A Perspective on Electronic Alternatives to Traditional Currencies," Working Papers 16-32, Chapman University, Economic Science Institute.
    11. Maria Bigoni & Gabriele Camera & Marco Casari, 2019. "Partners or Strangers? Cooperation, Monetary Trade, and the Choice of Scale of Interaction," American Economic Journal: Microeconomics, American Economic Association, vol. 11(2), pages 195-227, May.
    12. Masaki Aoyagi & V. Bhaskar & Guillaume R. Fréchette, 2019. "The Impact of Monitoring in Infinitely Repeated Games: Perfect, Public, and Private," American Economic Journal: Microeconomics, American Economic Association, vol. 11(1), pages 1-43, February.
    13. Maria Bigoni & Gabriele Camera & Marco Casari, 2019. "Cooperation among strangers with and without a monetary system," Working Papers 19-01, Chapman University, Economic Science Institute.
    14. repec:pit:wpaper:449 is not listed on IDEAS
    15. M. Bigoni & G. Camera & M. Casari, 2015. "Money and the Scale of Cooperation," Working Papers wp1045, Dipartimento Scienze Economiche, Universita' di Bologna.
    16. repec:mbr:jmonec:v:11:y:2016:i:3:p:245-265 is not listed on IDEAS
    17. Anbarci, Nejat & Dutu, Richard & Feltovich, Nick, 2015. "Inflation tax in the lab: a theoretical and experimental study of competitive search equilibrium with inflation," Journal of Economic Dynamics and Control, Elsevier, vol. 61(C), pages 17-33.
    18. Gabriele Camera & Cary Deck & David Porter, 2019. "Do Economic Inequalities Affect Long-Run Cooperation & Prosperity?," Working Papers 19-09, Chapman University, Economic Science Institute.
    19. Gabriele Camera & Cary Deck & David Porter, 2016. "Do Economic Inequalities Affect Long-Run Cooperation?," Working Papers 16-18, Chapman University, Economic Science Institute.
    20. repec:eee:jeborg:v:154:y:2018:i:c:p:253-280 is not listed on IDEAS
    21. Janet Hua Jiang & Cathy Zhang, 2017. "Competing Currencies in the Laboratory," Staff Working Papers 17-53, Bank of Canada.

    More about this item

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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