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Money and Reciprocity

  • Thorsten Hens
  • Bodo Vogt
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    Based on an experimental analysis of a simple monetary economy we argue that a monetary system is more stable than one would expect from individual rationality. We show that positive reciprocity stabilizes the monetary system, provided every participant considers the feedbacks of his choice to the stationary equilibrium. If however the participants do not play stationary strategies and some participants notoriously refuse to accept money then due to negative reciprocity their behavior will eventually induce a break down of the monetary system.

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    File URL: http://www.econ.uzh.ch/static/wp_iew/iewwp138.pdf
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    Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 138.

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    Handle: RePEc:zur:iewwpx:138
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    1. David K Levine, 1997. "Modeling Altruism and Spitefulness in Experiments," Levine's Working Paper Archive 2047, David K. Levine.
    2. Nobuhiro Kiyotaki & Randall Wright, 1989. "A contribution to the pure theory of money," Staff Report 123, Federal Reserve Bank of Minneapolis.
    3. Gary E Bolton & Axel Ockenfels, 1997. "A Theory of Equity, Reciprocity, and Competition," Levine's Working Paper Archive 1889, David K. Levine.
    4. Fehr, Ernst & Schmidt, Klaus M., 1998. "A Theory of Fairness, Competition and Cooperation," CEPR Discussion Papers 1812, C.E.P.R. Discussion Papers.
    5. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
    6. Gary Charness and Matthew Rabin., 2000. "Social Preferences: Some Simple Tests and a New Model," Economics Working Papers E00-283, University of California at Berkeley.
    7. Keser, Claudia & van Winden, Frans, 2000. " Conditional Cooperation and Voluntary Contributions to Public Goods," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 23-39, March.
    8. Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
    9. Boldrin, Michele & Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A dynamic equilibrium model of search, production, and exchange," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 723-758.
    10. 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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