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Intrinsically Worthless Objects as Media of Exchange: Experimental Evidence

  • John Duffy

    (University of Pittsburgh, USA)

  • Jack Ochs

    (University of Pittsburgh, USA)

This article reports results from an experiment that examines whether an intrinsically worthless, "token" object serves as a medium of exchange in a laboratory implementation of Kiyotaki and Wright's search model of money. The theory admits Nash equilibria in which the token object is or is not used as a medium of exchange. We find that subjects nearly always offer to trade for the token object when such a trade lowers their storage costs. However, subjects frequently refuse to offer to trade the token object for more costly-to-store goods when the theory predicts they should make such trades. Copyright Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association

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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 43 (2002)
Issue (Month): 3 (August)
Pages: 637-674

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Handle: RePEc:ier:iecrev:v:43:y:2002:i:3:p:637-674
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