Money and the Decentralization of Exchange
A pairwise trading process is formulated subject to conditions of nonnegativity of traders' holdings and quid pro quo. It is shown that that: (i) There is a centralized procedure that achieves the equilibrium allocation for an arbitrary economy. (ii) It is not in general possible to find a decentralized procedure that achieves the equilibrium allocation for an arbitrary economy. (iii) In a monetary economy there is a decentralized procedure that achieves the equilibrium allocation. The usefulness of money is that it allows decentralization of the trading process.
|Date of creation:||1973|
|Date of revision:|
|Publication status:||Published in Econometrica (November 1974), 42(6): 1093-1113|
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- Joseph M. Ostroy, 1972.
"The Informational Efficiency of Monetary Exchange,"
UCLA Economics Working Papers
021, UCLA Department of Economics.
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