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A Search-Theoretic Classroom Experiment with Money

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  • Denise Hazlett

    (Whitman College)

Abstract

This classroom experiment promotes discussion of the social origins and characteristics of money. Students take the roles of traders who face a double coincidence of wants problem. As they recognise the benefits of overcoming trading frictions, students spontaneously begin using a consumption good as a medium of exchange. The setting comes from Duffy and Ochs' (1999) experimental version of the Kiyotaki-Wright (1989) search model of money. In the Kiyotaki-Wright environment, agents specialise in production, consume a good other than their own product, and randomly meet in pairs to trade. Trading in this environment allows students to experience the social conditions that give rise to money, namely specialisation and decentralisation. The experiment also demonstrates how a particular characteristic can make a commodity a good candidate for becoming money.

Suggested Citation

  • Denise Hazlett, 2003. "A Search-Theoretic Classroom Experiment with Money," International Review of Economic Education, Economics Network, University of Bristol, vol. 2(1), pages 80-90.
    • Handle: RePEc:che:ireepp:v:2:y:2003:i:1:p:80-90
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    Cited by:

    1. Denise Hazlett & Kathy A. Paulson Gjerde & José J. Vazquez-Cognet & Judith A. Smrha, 2010. "Conducting Experiments in the Economics Classroom," Chapters, in: Michael K. Salemi & William B. Walstad (ed.), Teaching Innovations in Economics, chapter 5, Edward Elgar Publishing.
    2. David T. Mitchell & Robert P. Rebelein & Patricia H. Schneider & Nicole B. Simpson & Eric Fisher, 2009. "A Classroom Experiment on Exchange Rate Determination with Purchasing Power Parity," The Journal of Economic Education, Taylor & Francis Journals, vol. 40(2), pages 150-165, April.
    3. Mitchell, David & Hunsader, Kenneth & Parker, Scott, 2011. "A Futures Trading Experiment: An Active Classroom Approach to Learning," MPRA Paper 56496, University Library of Munich, Germany, revised 2011.

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