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The Coordination Value of Monetary Exchange: Experimental Evidence

  • Gabriele Camera
  • Marco Casari

A new behavioral foundation is uncovered for why money promotes impersonal exchange. In an experiment, subjects could cooperate by intertemporally exchanging goods with anonymous opponents met at random. Indefinite repetition supported multiple equilibria, from full defection to the efficient outcome. Introducing the possibility to hold and exchange intrinsically worthless tickets affected outcomes and cooperation patterns. Tickets resembled fiat money, which emerged as a tool for equilibrium selection in the economy. Monetary exchange facilitated coordination on cooperation and redistributed surplus from defectors to cooperators. Treatments where subjects could develop a reputation revealed a limited record-keeping role for monetary exchange.

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Paper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number 1239.

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Length: 45
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:pur:prukra:1239
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  9. Michi Kandori, 2010. "Social Norms and Community Enforcement," Levine's Working Paper Archive 630, David K. Levine.
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  11. Ernst Fehr & Simon Gaechter, . "Fairness and Retaliation: The Economics of Reciprocitys," IEW - Working Papers 040, Institute for Empirical Research in Economics - University of Zurich.
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  14. Ortmann, Andreas & Tichy, Lisa K., 1999. "Gender differences in the laboratory: evidence from prisoner's dilemma games," Journal of Economic Behavior & Organization, Elsevier, vol. 39(3), pages 327-339, July.
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