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Monetary Trading: An Optimal Exchange System

  • Carmona, Guilherme

We show that monetary trading is simple, self-enforcing, symmetric, and irreducible in a natural framework. Furthermore, we will show that the utility for each economic agent is at least as big under the monetary system as under any other simple, self-enforcing, symmetric, and irreducible trading system of the same complexity. Thus, we rationalize the monetary nature of real-world trade as being an efficient way to achieve those properties.

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File URL: http://fesrvsd.fe.unl.pt/WPFEUNL/WP2002/wp420.pdf
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Paper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp420.

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Length: 28 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:unl:unlfep:wp420
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  1. Carmona, Guilherme, 2002. "Social Norms and Monetary Trading," FEUNL Working Paper Series wp418, Universidade Nova de Lisboa, Faculdade de Economia.
  2. Ariel Rubinstein, 1997. "Finite automata play the repeated prisioners dilemma," Levine's Working Paper Archive 1639, David K. Levine.
  3. MERTENS, Jean-François & PARTHASARATHY, T., . "Equilibria for discounted stochastic games," CORE Discussion Papers RP 1666, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Kocherlakota, Narayana R., 1998. "Money Is Memory," Journal of Economic Theory, Elsevier, vol. 81(2), pages 232-251, August.
  5. P. D., 1988. "Introduction," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 10(4), pages 527, July.
  6. Kalai, Ehud & Stanford, William, 1988. "Finite Rationality and Interpersonal Complexity in Repeated Games," Econometrica, Econometric Society, vol. 56(2), pages 397-410, March.
  7. Michihiro Kandori, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 63-80.
  8. Glenn Ellison, 1994. "Cooperation in the Prisoner's Dilemma with Anonymous Random Matching," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 567-588.
  9. Kocherlakota, Narayana & Wallace, Neil, 1998. "Incomplete Record-Keeping and Optimal Payment Arrangements," Journal of Economic Theory, Elsevier, vol. 81(2), pages 272-289, August.
  10. Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1995. "Social Norms and Random Matching Games," Games and Economic Behavior, Elsevier, vol. 9(1), pages 79-109, April.
  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. 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.
  13. MERTENS, Jean-François, . "Stochastic games," CORE Discussion Papers RP 1587, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Humphrey, David B & Pulley, Lawrence B & Vesala, Jukka M, 1996. "Cash, Paper, and Electronic Payments: A Cross-Country Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 914-39, November.
  15. Townsend, Robert M, 1987. "Economic Organization with Limited Communication," American Economic Review, American Economic Association, vol. 77(5), pages 954-71, December.
  16. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May.
  17. Joao Gata, . "Repeated Random Matching Games under Restricted Information. Part I: Equilibria," Discussion Papers 95/19, Department of Economics, University of York.
  18. David B. Humphrey & Lawrence B. Pulley & Jukka M. Vesala, 1996. "Cash, paper, and electronic payments: a cross-country analysis," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 914-941.
  19. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
  20. 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.
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