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Commodity money with frequent search

Author

Listed:
  • Ezra Oberfield
  • Nicholas Trachter

Abstract

A prominent feature of the Kiyotaki and Wright (1989) model of commodity money is the multiplicity of dynamic equilibria. We show that the frequency of search is strongly related to the extent of multiplicity. To isolate the role of frequency of search in generating multiplicity, we (i) vary the frequency of search without changing the frequency of finding a trading partner and (ii) focus on symmetric dynamic equilibria, a class for which we can sharply characterize several features of the set of equilibria. For any finite frequency of search this class retains much of the multiplicity. For each frequency we characterize the full set of equilibrium payoffs, strategies played and dynamic paths of the state variables. Indexed by any of these features, the set of equilibria converges uniformly to a unique equilibrium in the continuous search limit. We conclude that when search is frequent, the seemingly exotic dynamics are irrelevant.

Suggested Citation

  • Ezra Oberfield & Nicholas Trachter, 2010. "Commodity money with frequent search," Working Paper Series WP-2010-22, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:wp-2010-22
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    Cited by:

    1. is not listed on IDEAS
    2. Choi, Michael & Rocheteau, Guillaume, 2022. "Money mining and price dynamics: The case of divisible currencies," Journal of Economic Dynamics and Control, Elsevier, vol. 142(C).
    3. Bonetto, Federico & Iacopetta, Maurizio, 2019. "A dynamic analysis of nash equilibria in search models with fiat money," Journal of Mathematical Economics, Elsevier, vol. 84(C), pages 207-224.
    4. Maurizio Iacopetta, 2019. "The emergence of money: a dynamic analysis," Sciences Po Economics Publications (main) hal-03403573, HAL.
    5. repec:spo:wpmain:info:hdl:2441/48v4b2d60n9bipfp9hcmbgtucs is not listed on IDEAS
    6. Kindler, A. & Bourgeois-Gironde, S. & Lefebvre, G. & Solomon, S., 2017. "New leads in speculative behavior," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 467(C), pages 365-379.
    7. Maurizio Iacopetta, 2019. "The emergence of money: a dynamic analysis," Post-Print hal-03403573, HAL.
    8. Lukas Altermatt & Kohei Iwasaki & Randall Wright, 2023. "General Equilibrium with Multiple Liquid Assets," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 267-291, December.
    9. Federico Bonetto & Maurizio Iacopetta, 2019. "A dynamic analysis of nash equilibria in search models with fiat money," Post-Print hal-03403584, HAL.
    10. Michael Choi & Guillaume Rocheteau, 2021. "Money Mining and Price Dynamics," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(4), pages 246-294, October.
    11. Burdett, Kenneth & Trejos, Alberto & Wright, Randall, 2017. "A new suggestion for simplifying the theory of money," Journal of Economic Theory, Elsevier, vol. 172(C), pages 423-450.
    12. Federico Bonetto & Maurizio Iacopetta, 2019. "A dynamic analysis of nash equilibria in search models with fiat money," Sciences Po Economics Publications (main) hal-03403584, HAL.
    13. Maurizio Iacopetta & Raoul Minetti, 2019. "Asset Dynamics, Liquidity, And Inequality In Decentralized Markets," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 537-551, January.
    14. Federico Bonetto & Maurizio Iacopetta, 2019. "A Dynamic Analysis of Nash Equilibria in Search Models with Fiat Money ," Post-Print halshs-03515530, HAL.
    15. repec:spo:wpmain:info:hdl:2441/4kidd5kmrd8huad84htlv8ih5r is not listed on IDEAS

    More about this item

    Keywords

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    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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