Endogenous buyer-seller choice and divisible money in search equilibrium
In the Lagos-Wright model [R. Lagos, R. Wright, A unified framework for monetary theory and policy analysis, J. Polit. Economy 113 (2005) 463-484], the quasi-linear preferences assumption is not necessary to generate simple distributions of money holdings if individuals choose endogenously to go to the search market as buyers or as sellers. The non-convex buyer-seller choice provides an incentive for gambling in lotteries, and, as a result, the value function has a linear interval. As long as this interval is the relevant one for evaluating their future utilities, individuals behave as if their preferences were quasi-linear. In the stationary equilibrium, individuals remain inside this linear interval if the money supply does not decline.
When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:141:y:2008:i:1:p:184-199. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.