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A Theory of Money with Market Places


  • Akihiko Matsui

    (Faculty of Economics, University of Tokyo)

  • Takashi Shimizu

    (Faculty of Economics, University of Tokyo)


This paper considers an infinitely repeated economy in which divisible fiat money is used to trade goods. The economy has many market places. In each period, each agent chooses a market place, randomly meets someone who comes to the same market place, and they trade their goods when both agree to do so. There exist various classes of stationary equilibria. In some equilibria, all the agents visit the same market place, while in others, market places are specialized, i.e., only one type of good is traded in each active market place. In some equilibria, each good is traded at a single price, while in others, every good is traded at two different prices. Each class itself consists of equilibria with infinitely many price and welfare levels. However, it is shown that only efficient single price equilibria with specialized market places are evolutionarily stable. An inefficient equilibrium is upset by the mutants who visit a new market place to establish a more efficient trading pattern than before. An extension to the case with multiple currencies is also examined.

Suggested Citation

  • Akihiko Matsui & Takashi Shimizu, 2000. "A Theory of Money with Market Places," CIRJE F-Series CIRJE-F-92, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2000cf92

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    References listed on IDEAS

    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Yuichi Kitamura & Gautam Tripathi & Hyungtaik Ahn, 2004. "Empirical Likelihood-Based Inference in Conditional Moment Restriction Models," Econometrica, Econometric Society, vol. 72(6), pages 1667-1714, November.
    3. Naoto Kunitomo & Yukitoshi Matsushita, 2003. "On Finite Sample Distributions of the Empirical Likelihood Estimator and the GMM Estimator," CIRJE F-Series CIRJE-F-200, CIRJE, Faculty of Economics, University of Tokyo.
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    Cited by:

    1. Kazuya Kamiya & Takashi Sato, 2004. "Equilibrium Price Dispersion in a Matching Model with Divisible Money," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 413-430, May.
    2. Berentsen, Aleksander & Menzio, Guido & Wright, Randall D., 2007. "Inflation and Unemployment: Lagos-Wright meets Mortensen-Pissarides," Kiel Working Papers 1334, Kiel Institute for the World Economy (IfW).
    3. Kamiya, K. & Talman, A.J.J., 2003. "Random Matching Models and Money : The Global Structure and Approximation of Stationary Equilibria," Discussion Paper 2003-70, Tilburg University, Center for Economic Research.
    4. Kazuya Kamiya & Dolf Talman, 2003. "Random Matching Models and Money: The Global Structure and Approximation of the Set of Stationary Equilibria," CIRJE F-Series CIRJE-F-220, CIRJE, Faculty of Economics, University of Tokyo.

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