Social Norms and Monetary Trading
Random matching models have been used in Monetary Economics to argue that money can increase the well being of all agents in the economy. If the model features a finite number of agents it will be shown that there is an equilibrium, analogous to the contagious equilibria described in Kandori (1992), that Pareto dominates the monetary one. However it will be shown also that monetaty equilibria have two important advantages: firstly, they are more plausible in large economies in the sense that the lowest discount factor compatible with monetary equilibria doesn't depend on the population size, which is not the case with contagious equilibria; secondly, it is more stable to finite deviations in the following sense: no matter what the past has been, future play of the equilibrium strategies will give players the same payoff as if the equilibrium strategies were always followed.
|Date of creation:||27 Feb 2004|
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References listed on IDEAS
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- Kocherlakota, Narayana R., 1998.
"Money Is Memory,"
Journal of Economic Theory,
Elsevier, vol. 81(2), pages 232-251, August.
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- Joao Gata, "undated". "Repeated Random Matching Games under Restricted Information. Part I: Equilibria," Discussion Papers 95/19, Department of Economics, University of York.
- Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1995. "Social Norms and Random Matching Games," Games and Economic Behavior, Elsevier, vol. 9(1), pages 79-109, April.
- Michihiro Kandori, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 63-80. Full references (including those not matched with items on IDEAS)