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Rate-of-Return Dominance and Efficiency in an Experimental Economy

One of the main challenges for monetary economics is to explain the use of assets that are dominated in rate-of-return as media of exchange. In this paper, we use experimental methods to study how a fiat money might come to be used in transactions when an identically marketable, dividend-bearing asset, a consol, is also available.

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Paper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number 1135.

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Length: 34 pages
Date of creation: Aug 2000
Date of revision:
Handle: RePEc:pur:prukra:1135
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  1. Aliprantis, Charalambos D & Plott, Charles R, 1992. "Competitive Equilibria in Overlapping Generations Experiments," Economic Theory, Springer, vol. 2(3), pages 389-426, July.
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  3. John Duffy, 1998. "Monetary theory in the laboratory," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 9-26.
  4. John Kareken & Neil Wallace, 1981. "On the Indeterminacy of Equilibrium Exchange Rates," The Quarterly Journal of Economics, Oxford University Press, vol. 96(2), pages 207-222.
  5. Joyce, Patrick, 1998. "Demand revelation and tatonnement auctions," Journal of Economic Behavior & Organization, Elsevier, vol. 36(2), pages 163-175, August.
  6. McCabe, Kevin A., 1989. "Fiat money as a store of value in an experimental market," Journal of Economic Behavior & Organization, Elsevier, vol. 12(2), pages 215-231, October.
  7. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
  8. Shouyong Shi, 1995. "Credit and Money in a Search Model with Divisible Commodities," Working Papers 917, Queen's University, Department of Economics.
  9. Gardner, Roy & Ostrom, Elinor, 1991. " Rules and Games," Public Choice, Springer, vol. 70(2), pages 121-49, May.
  10. Freeman, Scott J, 1989. "Fiat Money as a Medium of Exchange," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 137-51, February.
  11. Neil Wallace, 1997. "Absence-of-double-coincidence models of money: a progress report," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-20.
  12. Jean-Michel Grandmont & Yves Younes, 1972. "On the Role of Money and the Existence of a Monetary Equilibrium," Review of Economic Studies, Oxford University Press, vol. 39(3), pages 355-372.
  13. Ramon Marimon & Shyam Sunder, 1993. "Expectations and learning under alternative monetary regimes: An experimental approach," Economics Working Papers 37, Department of Economics and Business, Universitat Pompeu Fabra.
  14. Feenstra, Robert C., 1986. "Functional equivalence between liquidity costs and the utility of money," Journal of Monetary Economics, Elsevier, vol. 17(2), pages 271-291, March.
  15. Lim, Suk S & Prescott, Edward C & Sunder, Shyam, 1994. "Stationary Solution to the Overlapping Generations Model of Fiat Money: Experimental Evidence," Empirical Economics, Springer, vol. 19(2), pages 255-77.
  16. Miguel Sidrauski, 1967. "Inflation and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 75, pages 796.
  17. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
  18. Diamond, Peter & Yellin, Joel, 1990. "Inventories and Money Holdings in a Search Economy," Econometrica, Econometric Society, vol. 58(4), pages 929-50, July.
  19. Walker, James M, et al, 2000. "Collective Choice in the Commons: Experimental Results on Proposed Allocation Rules and Votes," Economic Journal, Royal Economic Society, vol. 110(460), pages 212-34, January.
  20. Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 203-20, April.
  21. Brown, Paul M., 1996. "Experimental evidence on money as a medium of exchange," Journal of Economic Dynamics and Control, Elsevier, vol. 20(4), pages 583-600, April.
  22. Brunner, Karl & Meltzer, Allan H, 1971. "The Uses of Money: Money in the Theory of an Exchange Economy," American Economic Review, American Economic Association, vol. 61(5), pages 784-805, December.
  23. Jack Ochs & John Duffy, 1999. "Emergence of Money as a Medium of Exchange: An Experimental Study," American Economic Review, American Economic Association, vol. 89(4), pages 847-877, September.
  24. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
  25. Townsend, Robert M., 1987. "Asset-return anomalies in a monetary economy," Journal of Economic Theory, Elsevier, vol. 41(2), pages 219-247, April.
  26. Hellwig, Martin F., 1993. "The challenge of monetary theory," European Economic Review, Elsevier, vol. 37(2-3), pages 215-242, April.
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