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Anonymous markets and monetary trading

  • D. Aliprantis, C.
  • Camera, G.
  • Puzzello, D.

We study an infinite-horizon economy with two basic frictions that are typical in monetary models. First, agents’ trading paths cross at most once due to pairwise trade and other meeting obstacles. Second, actions must be compatible with individual incentives due to commitment and enforcement limitations. We find that, with patient agents, relaxing the first friction by introducing centralized markets, opens the door to an informal enforcement scheme sustaining a non-monetary efficient allocation. Hence, we present a matching environment in which agents repeatedly access large markets and yet the basic frictions are retained. This allows the construction of models based on competitive markets in which money plays an essential role.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 54 (2007)
Issue (Month): 7 (October)
Pages: 1905-1928

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Handle: RePEc:eee:moneco:v:54:y:2007:i:7:p:1905-1928
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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  1. Camera, Gabriele, 2000. "Money, Search, And Costly Matchmaking," Macroeconomic Dynamics, Cambridge University Press, vol. 4(03), pages 289-323, September.
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  5. Edward J. Green & Ruilin Zhou, 2000. "Dynamic monetary equilibrium in a random-matching economy," Working Paper Series WP-00-1, Federal Reserve Bank of Chicago.
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  7. Shouyong Shi, 1996. "A Divisible Search Model of Fiat Money," Working Papers 930, Queen's University, Department of Economics.
  8. Aleksander Berentsen & Gabriele Camera & Christopher Waller, . "The Distribution of Money Balances and the Non-Neutrality of Money," IEW - Working Papers 220, Institute for Empirical Research in Economics - University of Zurich.
  9. Narayana R. Kocherlakota, 1996. "Money is memory," Staff Report 218, Federal Reserve Bank of Minneapolis.
  10. Pesendorfer, Wolfgang & Levine, David & Fudenberg, Drew, 1998. "When Are Nonanonymous Players Negligible?," Scholarly Articles 3203775, Harvard University Department of Economics.
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  14. Aliprantis, C. D. & Camera, G. & Puzzelo, D., 2004. "A Random Matching Theory," Purdue University Economics Working Papers 1168, Purdue University, Department of Economics.
  15. 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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  18. Charalambos Aliprantis & Gabriele Camera & Daniela Puzzello, 2006. "Matching and anonymity," Economic Theory, Springer, vol. 29(2), pages 415-432, October.
  19. Hellwig, Martin F., 1993. "The challenge of monetary theory," European Economic Review, Elsevier, vol. 37(2-3), pages 215-242, April.
  20. Hahn, Frank H, 1973. "On Transaction Costs, Inessential Sequence Economies and Money," Review of Economic Studies, Wiley Blackwell, vol. 40(4), pages 449-61, October.
  21. Michi Kandori, 2010. "Social Norms and Community Enforcement," Levine's Working Paper Archive 630, David K. Levine.
  22. Neil Wallace, 1998. "A dictum for monetary theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 20-26.
  23. Boel, Paola & Camera, Gabriele, 2004. "Efficient Monetary Allocations and the Illiquidity of Bonds," Purdue University Economics Working Papers 1171, Purdue University, Department of Economics.
  24. Mark Huggett & Stefan Krasa, 1996. "Money and storage in a differential information economy (*)," Economic Theory, Springer, vol. 8(2), pages 191-209.
  25. Green, Edward J., 1980. "Noncooperative price taking in large dynamic markets," Journal of Economic Theory, Elsevier, vol. 22(2), pages 155-182, April.
  26. Al-Najjar, Nabil I. & Smorodinsky, Rann, 2001. "Large Nonanonymous Repeated Games," Games and Economic Behavior, Elsevier, vol. 37(1), pages 26-39, October.
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