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A Strategic Market Game with a Mutual Bank with Fractional Reserves and Redemption in Gold (A Continuum of Traders)

We utilize the strategic market game approach to analyze the role and function of a mutual bank with variable fractional reserves, redemption in gold and endogenous interest rate formation. We specify the conditions of enough money and its distribution. Using the continuum of traders model, we show existence and optimality for the case of no bankruptcy as well as for the case in which there exists the potentiality of bankruptcy. Finally, we analyze the relationship of the gearing ratio and the bankruptcy penalty with respect to the resulting equilibrium allocations.

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Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 964.

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Length: 24 pages
Date of creation: Dec 1990
Publication status: Published in Journal of Economics (1992), 55(2): 123-150
Handle: RePEc:cwl:cwldpp:964
Note: CFP 812.
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Order Information: Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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  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. Martin Shubik, 1986. "Enough Commodity Money and the Selection of a Unique Competitive Equilibrium," Cowles Foundation Discussion Papers 804, Cowles Foundation for Research in Economics, Yale University.
  3. Pradeep Dubey & John Geanakoplos & Martin Shubik, 1988. "Default and Efficiency in a General Equilibrium Model with Incomplete Markets," Cowles Foundation Discussion Papers 879R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1989.
  4. John Geanakoplos & Pradeep Dubey, 1989. "Liquidity and Bankruptcy with Incomplete Markets: Pure Exchange," Cowles Foundation Discussion Papers 900, Cowles Foundation for Research in Economics, Yale University.
  5. Shubik, Martin, 1987. "The unique minimal cash flow competitive equilibrium," Economics Letters, Elsevier, vol. 25(4), pages 303-306.
  6. 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.
  7. Shubik, Martin, 1985. "A note on enough money in a strategic market game with complete or fewer markets," Economics Letters, Elsevier, vol. 19(3), pages 231-235.
  8. Martin Shubik & Shuntian Yao, 1989. "The Transactions Cost of Money (A Strategic Game Analysis)," Cowles Foundation Discussion Papers 903, Cowles Foundation for Research in Economics, Yale University.
  9. Martin Shubik, 1990. "The transactions trust demand for money," Journal of Economics, Springer, vol. 52(3), pages 211-232, October.
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