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A strategic market game with seigniorage costs of Fiat money


  • Dimitrios P. Tsomocos

    () (Financial Industry and Regulation Division, Bank of England, Threadneedle Street, London Ec2R 8AH, UK)

  • Martin Shubik

    () (Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281, USA)


A model that includes the cost of producing money is presented and the nature of the inefficient equilibria in the model are examined. It is suggested that if one acknowledges that transactions are a form of production, which requires the consumption of resources, then the concept of Pareto optimality is inappropriate for assessing efficiency. Instead it becomes necessary to provide an appropriate comparative analysis of alternative transactions mechanisms in the appropriate context.

Suggested Citation

  • Dimitrios P. Tsomocos & Martin Shubik, 2002. "A strategic market game with seigniorage costs of Fiat money," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 19(1), pages 187-201.
  • Handle: RePEc:spr:joecth:v:19:y:2002:i:1:p:187-201 Note: Received: September 5, 2000; revised version: May 3, 2001

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    References listed on IDEAS

    1. John Geanakoplos & Pradeep Dubey, 1989. "Existence of Walras Equilibrium Without a Price Player of Generalized Game," Cowles Foundation Discussion Papers 912, Cowles Foundation for Research in Economics, Yale University.
    2. M. Shubik & D. Tsomocos, 1992. "A strategic market game with a mutual bank with fractional reserves and redemption in gold," Journal of Economics, Springer, vol. 55(2), pages 123-150, June.
    3. Shubik, Martin & Yao, Shuntian, 1990. "The transactions cost of money (a strategic market game analysis)," Mathematical Social Sciences, Elsevier, vol. 20(2), pages 99-114, October.
    4. Martin Shubik & D.P. Tsomocos, 1990. "A Strategic Market Game with a Mutual Bank with Fractional Reserves and Redemption in Gold (A Continuum of Traders)," Cowles Foundation Discussion Papers 964, Cowles Foundation for Research in Economics, Yale University.
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    Cited by:

    1. Tsomocos, Dimitrios P., 2008. "Generic determinacy and money non-neutrality of international monetary equilibria," Journal of Mathematical Economics, Elsevier, vol. 44(7-8), pages 866-887, July.
    2. Martin Shubik, 2007. "The Theory of Money and Financial Institutions: A Summary of a Game Theoretic Approach," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(2), pages 6-26, May.
    3. Dmitry Levando, 2012. "A Survey Of Strategic Market Games," Economic Annals, Faculty of Economics, University of Belgrade, vol. 57(194), pages 63-106, July - Se.
    4. F H Capie & Dimitrios P Tsomocos & Geoffrey E Wood, 2003. "E-barter versus fiat money: will central banks survive?," Bank of England working papers 197, Bank of England.

    More about this item


    Strategic market games; Seigniorage costs; Inefficiency.;

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers


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