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Why Ten $1's Are Not Treated as a $10

Huang, Pidong and Igarashi, Yoske (2013): Why Ten $1's Are Not Treated as a $10.

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Abstract

We study the stability of monetary steady states in a random matching model of money where money is indivisible, the bound on individual money holding is finite, and the trading protocol is buyer take-it-or-leave-it offers. The class of steady states we study have a non-full-support money-holding distribution and are constructed from the steady states of Zhu (2003). We show that no equilibrium path converges to such steady states if the initial distribution has a different support.

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