IDEAS home Printed from https://ideas.repec.org/a/eee/mateco/v44y2008i12p1413-1427.html
   My bibliography  Save this article

Commodity money equilibrium in a convex trading post economy with transaction costs

Author

Listed:
  • Starr, Ross M.

Abstract

Existence and efficiency of general equilibrium with commodity money is investigated in an economy where N commodities are traded at N(N-1)/2 commodity-pairwise trading posts. Trade is a resource-using activity recovering transaction costs through the spread between bid (wholesale) and ask (retail) prices. Budget constraints, enforced at each trading post separately, imply demand for a carrier of value between trading posts. Existence of general equilibrium is established under conventional convexity and continuity conditions while structuring the price space to account for distinct bid and ask price ratios. Commodity money flows are identified as the difference between gross and net inter-post trades.

Suggested Citation

  • Starr, Ross M., 2008. "Commodity money equilibrium in a convex trading post economy with transaction costs," Journal of Mathematical Economics, Elsevier, vol. 44(12), pages 1413-1427, December.
    • Handle: RePEc:eee:mateco:v:44:y:2008:i:12:p:1413-1427
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304-4068(08)00007-4
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Kurz, Mordecai, 1974. "Equilibrium in a Finite Sequence of Markets with Transaction Cost," Econometrica, Econometric Society, vol. 42(1), pages 1-20, January.
    2. repec:cdl:ucsdec:qt92k1n9mn is not listed on IDEAS
    3. Ross M. Starr, 2003. "Why is there money? Endogenous derivation of `money' as the most liquid asset: a class of examples," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(2), pages 455-474, March.
    4. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-954, August.
    5. Shapley, Lloyd S & Shubik, Martin, 1977. "Trade Using One Commodity as a Means of Payment," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 937-968, October.
    6. Starr, Ross M., 2003. "Monetary general equilibrium with transaction costs," Journal of Mathematical Economics, Elsevier, vol. 39(3-4), pages 335-354, June.
    7. Frank Hahn, 1973. "On Transaction Costs, Inessential Sequence Economies and Money," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(4), pages 449-461.
    8. Hahn, F H, 1971. "Equilibrium with Transaction Costs," Econometrica, Econometric Society, vol. 39(3), pages 417-439, May.
    9. Dror Goldberg, 2012. "The tax-foundation theory of fiat money," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(2), pages 489-497, June.
    10. Foley, Duncan K., 1970. "Economic equilibrium with costly marketing," Journal of Economic Theory, Elsevier, vol. 2(3), pages 276-291, September.
    11. Starr, Ross M., 2008. "Mengerian saleableness and commodity money in a Walrasian trading post example," Economics Letters, Elsevier, vol. 100(1), pages 35-38, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Maya Eden & Benjamin S. Kay, 2019. "Safe Assets as Commodity Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(6), pages 1651-1689, September.
    2. Anderlini, L. & Felli, L. & Piccone, M., 2022. "The Emergence of Enforcement," Cambridge Working Papers in Economics 2250, Faculty of Economics, University of Cambridge.
    3. Gheorghe Săvoiu & Vasile Dinu & Laurenţiu Tăchiciu, 2012. "Romania Foreign Trade in Global Recession, Revealed by the Extended Method of Exchange Rate Indicators," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 14(31), pages 173-194, February.
    4. repec:cdl:ucsdec:qt8qr0r0n7 is not listed on IDEAS
    5. Shami, Labib, 2019. "Dynamic monetary equilibrium with a Non-Observed Economy and Shapley and Shubik’s price mechanism," Journal of Macroeconomics, Elsevier, vol. 62(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:cdl:ucsdec:qt8rj7w6vg is not listed on IDEAS
    2. repec:cdl:ucsdec:qt3wx6s4z8 is not listed on IDEAS
    3. Ross M. Starr, 2012. "Why is there Money?," Books, Edward Elgar Publishing, number 13763.
    4. repec:cdl:ucsdec:qt2s87k9cj is not listed on IDEAS
    5. Starr, Ross M., 2010. "The Jevons double coincidence condition and local uniqueness of money: An example," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 786-792, September.
    6. repec:cdl:ucsdec:qt3267p6wj is not listed on IDEAS
    7. repec:cdl:ucsdec:qt1vk1k4fm is not listed on IDEAS
    8. repec:cdl:ucsdec:qt0ct6f4nc is not listed on IDEAS
    9. repec:cdl:ucsdec:qt90g2070h is not listed on IDEAS
    10. repec:cdl:ucsdec:qt1200q2z3 is not listed on IDEAS
    11. repec:cdl:ucsdec:qt4tn3m0tx is not listed on IDEAS
    12. repec:cdl:ucsdec:qt660465rm is not listed on IDEAS
    13. Dubey, Pradeep & Sahi, Siddhartha & Shubik, Martin, 2018. "Money as minimal complexity," Games and Economic Behavior, Elsevier, vol. 108(C), pages 432-451.
    14. Pradeep Dubey & Siddhartha Sahi & Martin Shubik, 2014. "Minimally complex exchange mechanisms: Emergence of prices, markets, and money," Department of Economics Working Papers 14-01, Stony Brook University, Department of Economics.
    15. repec:cdl:ucsdec:qt92k1n9mn is not listed on IDEAS
    16. Dubey, Pradeep & Sahi, Siddhartha & Shubik, Martin, 2018. "Graphical exchange mechanisms," Games and Economic Behavior, Elsevier, vol. 108(C), pages 452-465.
    17. Hoje Jo & Haehean Park & Hersh Shefrin, 2020. "Bitcoin and sentiment," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(12), pages 1861-1879, December.
    18. repec:cdl:ucsdec:qt8qr0r0n7 is not listed on IDEAS
    19. repec:cdl:ucsdec:qt7q79h1vf is not listed on IDEAS
    20. Starr, Ross M., 2008. "Mengerian saleableness and commodity money in a Walrasian trading post example," Economics Letters, Elsevier, vol. 100(1), pages 35-38, July.
    21. repec:cdl:ucsdec:qt253553nn is not listed on IDEAS
    22. Łukasz Hardt, 2006. "Narodziny i ewolucja treści znaczeniowej wyrażenia „koszt transakcyjny”," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 11-12, pages 1-24.
    23. Ross Starr, 2000. "Why is there Money? Convergence to a Monetary Equilibrium in a General Equilibrium Model with Transaction Costs," Econometric Society World Congress 2000 Contributed Papers 0058, Econometric Society.
    24. M. Shahe Emran & A. K. M. Mahbub Morshed & Joseph E. Stiglitz, 2021. "Microfinance and missing markets," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 34-67, February.
    25. Jean-Michel Grandmont, 1976. "Théorie de l'équilibre temporaire général," Revue Économique, Programme National Persée, vol. 27(5), pages 805-843.
    26. CITANNA, Alessandro, 2000. "Proportional transaction costs on asset trades : a note on existence by homotopy methods," HEC Research Papers Series 717, HEC Paris.
    27. Alexander W. Salter & William J. Luther, 2014. "Synthesizing State and Spontaneous Order Theories of Money," Advances in Austrian Economics, in: Entangled Political Economy, volume 18, pages 161-178, Emerald Group Publishing Limited.
    28. repec:cdl:ucsdec:qt4mz6w2j1 is not listed on IDEAS
    29. Costas Lapavitsas, 2005. "The Emergence of Money in Commodity Exchange, or Money as Monopolist of the Ability to Buy," Review of Political Economy, Taylor & Francis Journals, vol. 17(4), pages 549-569.
    30. Hardt, Łukasz, . "Narodziny i ewolucja treści znaczeniowej wyrażenia „koszt transakcyjny”," Gospodarka Narodowa-The Polish Journal of Economics, Szkoła Główna Handlowa w Warszawie / SGH Warsaw School of Economics, vol. 2006(11-12).
    31. Pingle, Mark & Mukhopadhyay, Sankar, 2010. "Private money as a competing medium of exchange," Journal of Macroeconomics, Elsevier, vol. 32(2), pages 541-554, June.
    32. Menzio, Guido & Shi, Shouyong & Sun, Hongfei, 2013. "A monetary theory with non-degenerate distributions," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2266-2312.
    33. Martin Shubik, 2006. "The Theory of Money and Financial Institutions: A Summary of a Game Theoretic Approach," Levine's Bibliography 321307000000000299, UCLA Department of Economics.
    34. Diarmid Weir, 2013. "Fiat Money, Individual Rationality and Production," Metroeconomica, Wiley Blackwell, vol. 64(4), pages 573-590, November.
    35. Munetomo Ando & Daisuke Oyama, 2002. "A model of a spatial economy with trading posts," Economics Bulletin, AccessEcon, vol. 18(1), pages 1-11.

    More about this item

    Keywords

    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:mateco:v:44:y:2008:i:12:p:1413-1427. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jmateco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.