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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. John Moore & Nobuhiro Kiyotaki, 2008. "Liquidity, Business Cycles, and Monetary Policy," 2008 Meeting Papers 35, Society for Economic Dynamics.
  2. Aleksander Berentsen & Gabriele Camera & C hristopher W aller, 2005. "The Distribution Of Money Balances And The Nonneutrality Of Money," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 465-487, 05.
  3. Charalambos Aliprantis & Gabriele Camera & Daniela Puzzello, 2006. "Matching and anonymity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(2), pages 415-432, October.
  4. Huggett, Mark & Krasa, Stefan, 1996. "Money and Storage in a Differential Information Economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 191-210, August.
  5. 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.
  6. Camera, Gabriele, 2000. "Money, Search, And Costly Matchmaking," Macroeconomic Dynamics, Cambridge University Press, vol. 4(03), pages 289-323, September.
  7. Guillaume Rocheteau & Randall Wright, 2003. "Money in Search Equilibrium, in Competitive Equilibrium, and in Competitive Search Equilibrium," PIER Working Paper Archive 03-031, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  8. Boel, Paola & Camera, Gabriele, 2004. "Efficient Monetary Allocations and the Illiquidity of Bonds," Purdue University Economics Working Papers 1171, Purdue University, Department of Economics.
  9. Ricardo Lagos & Randall Wright, 2002. "A unified framework for monetary theory and policy analysis," Working Paper 0211, Federal Reserve Bank of Cleveland.
  10. Aliprantis, C. D. & Camera, G. & Puzzelo, D., 2004. "A Random Matching Theory," Purdue University Economics Working Papers 1168, Purdue University, Department of Economics.
  11. Shouyong Shi, 1996. "A Divisible Search Model of Fiat Money," Working Papers 930, Queen's University, Department of Economics.
  12. Edward J. Green & Ruilin Zhou, . "A Rudimentary Model of Search with Divisible Money and Prices," Penn CARESS Working Papers 2772f94306e08ef7292945588, Penn Economics Department.
  13. Edward J. Green & Ruilin Zhou, 2002. "Dynamic Monetary Equilibrium in a Random Matching Economy," Econometrica, Econometric Society, vol. 70(3), pages 929-969, May.
  14. Fudenberg, Drew & Levine, David & Pesendorfer, Wolfgang, 1998. "When Are Nonanonymous Players Negligible?," Journal of Economic Theory, Elsevier, vol. 79(1), pages 46-71, March.
  15. Wolfgang Pesendorfer & David Levine, 1992. "When are Agents Negligible?," Discussion Papers 1018, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  16. Green, Edward J., 1980. "Noncooperative price taking in large dynamic markets," Journal of Economic Theory, Elsevier, vol. 22(2), pages 155-182, April.
  17. Michihiro Kandori, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 63-80.
  18. Neil Wallace, 1998. "A dictum for monetary theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 20-26.
  19. Narayana R. Kocherlakota, 1996. "Money is memory," Staff Report 218, Federal Reserve Bank of Minneapolis.
  20. Araujo, Luis, 2004. "Social norms and money," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 241-256, March.
  21. Ostroy, Joseph M, 1973. "The Informational Efficiency of Monetary Exchange," American Economic Review, American Economic Association, vol. 63(4), pages 597-610, September.
  22. Hellwig, Martin F., 1993. "The challenge of monetary theory," European Economic Review, Elsevier, vol. 37(2-3), pages 215-242, April.
  23. Camera, Gabriele & Corbae, Dean, 1999. "Money and Price Dispersion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 985-1008, November.
  24. Michi Kandori, 2010. "Social Norms and Community Enforcement," Levine's Working Paper Archive 630, David K. Levine.
  25. Glen Ellison, 2010. "Cooperation in the Prisoner's Dilemma with Anonymous Random Matching," Levine's Working Paper Archive 631, David K. Levine.
  26. Al-Najjar, Nabil I. & Smorodinsky, Rann, 2001. "Large Nonanonymous Repeated Games," Games and Economic Behavior, Elsevier, vol. 37(1), pages 26-39, October.
  27. Glenn Ellison, 1994. "Cooperation in the Prisoner's Dilemma with Anonymous Random Matching," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 567-588.
  28. Frank Hahn, 1973. "On Transaction Costs, Inessential Sequence Economies and Money," Review of Economic Studies, Oxford University Press, vol. 40(4), pages 449-461.
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