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Fiat Exchange in Finite Economies

  • Kovenock, D.
  • De Vries, C.G.

The state of the art of rendering fiat money valuable is either to impose a boundary condition, or to make the boundary condition unimportant by using infinities concerning the sequence of markets and/or the number of agents, so as to circumvent backward induction.We present two models of fiat exchange in deliberately finite economies in which the usage is not imposed.In the first approach agents have incomplete information about their relative position in the trade cycle.The second approach relies on the possibility that multiple non-monetary equilibria of the one-shot game can support monetary equilibria in the repeated game.

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Paper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number 1079.

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Length: 28 pages
Date of creation: 1995
Date of revision:
Handle: RePEc:pur:prukra:1079
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  1. Aliprantis, Charalambos D & Plott, Charles R, 1992. "Competitive Equilibria in Overlapping Generations Experiments," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(3), pages 389-426, July.
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  14. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, December.
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