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Indirect reciprocity and money

  • Hens, Thorsten
  • Vogt, Bodo
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    Using an experimental analysis of a simple monetary economy as a basis, we argue that a monetary system can be more stable than one would expect from individual rationality. We show that positive reciprocity stabilizes the monetary system, provided every participant considers the feedback of his choice to the stationary equilibrium. If, however, the participants do not play stationary strategies and some participants notoriously refuse to accept money, then due to negative reciprocity their behavior will eventually induce a break-down of the monetary system.

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    File URL: http://www.sciencedirect.com/science/article/B6WFW-4YDT408-1/2/46f1974c450e2e5e4e47a54f9a0ba078
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    Article provided by Elsevier in its journal Games and Economic Behavior.

    Volume (Year): 70 (2010)
    Issue (Month): 2 (November)
    Pages: 354-374

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    Handle: RePEc:eee:gamebe:v:70:y:2010:i:2:p:354-374
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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    9. 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.
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    13. Jack Ochs & John Duffy, 1999. "Emergence of Money as a Medium of Exchange: An Experimental Study," American Economic Review, American Economic Association, vol. 89(4), pages 847-877, September.
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    16. Wright, Randall, 1995. "Search, evolution, and money," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 181-206.
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