A comment on: 'Efficient propagation of shocks and the optimal return on money'

Huang, Pidong and Igarashi, Yoske (2011): A comment on: 'Efficient propagation of shocks and the optimal return on money'. Published in: Journal of Economic Theory , Vol. 147, No. 1 (1 January 2012): p. 7.

Abstract

Lotteries are introduced into Cavalcanti and Erosa (2008) [2], a version of Trejos and Wright (1995) [4] with aggregate shocks. Lotteries improve welfare and eliminate the two notable features of the optimum with deterministic trades: over-production and history-dependence. Moreover, the optimum can be supported by buyer take-it-or-leave-it offers.

• Item Type: MPRA Paper
• Language: English
• Keywords: Random matching model of money; Aggregate shock; Optimal allocation; History-dependence; Lottery
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C78 - Bargaining Theory ; Matching Theory; D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency ; Cost-Benefit Analysis; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E30 - General; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E40 - General; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E50 - General

References

A. Berentsen, M. Molico, R. Wright, Indivisibilities, lotteries, and monetary exchange, J. Econ. Theory 107 (2002) 70–94.

R. Cavalcanti, A. Erosa, Efficient propagation of shocks and the optimal return on money, J. Econ. Theory 142 (2008) 128–148.

R. Cavalcanti, N. Wallace, A model of private bank-note issue, Rev. Econ. Dynam. 2 (1999) 104–136.

A. Trejos, R. Wright, Search, bargaining, money and prices, J. Polit. Economy 103 (1995) 118–141.