Amendola, Nicola (2008): A "double coincidence" search model of money.
Download (214kB) | Preview
According to Engineer and Shi (1998, 2001) and Berentsen and Rocheteau (2003), the double coincidence of wants problem seems to be not essential to rationalize the use of money in a search theoretic framework. This paper analyzes an endogenous price search model of money where there is universal double coincidence of wants. The existence of a monetary equilibrium depends, essentially, on the asymmetry in the role played by economic agents in the exchange and production processes. In particular, entrepreneurs are assumed to produce a fixed amount of a divisible consumption good by means of labour services provided by workers. Entrepreneurs can offer a co-operative (barter) contract or a monetary contract to workers. Under the co-operative contract real wages are determined in the labour exchange sector, while in the monetary regime real wages are determined in the commodity exchange sector. The monetary contract is proved to be an equilibrium strategy provided that: (i) the workers' labour disutility is sufficiently high and/or (ii) the entrepreneurs' bargaining power in the commodity market is sufficiently large relative to their bargaining power in the labour market. The rationale for money comes from the fact that entrepreneurs use it as an instrument to maximize their output share.
|Item Type:||MPRA Paper|
|Original Title:||A "double coincidence" search model of money|
|Keywords:||Money, Search, Double Coincidence, Bargaining|
|Subjects:||C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C78 - Bargaining Theory ; Matching Theory
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E40 - General
|Depositing User:||nicola amendola|
|Date Deposited:||19. Mar 2008 15:02|
|Last Modified:||25. Feb 2013 23:56|
Amendola, N. (2008), A Selection Mechanism for the Barter equilibrium in the Search Theoretic Monetary Model, Economics Bulletin, Vol. 5, no 2, pp.1-10
Berentsen, A. and Rocheteau, G. (2003), Money and the Gains from Trade, International Economic Review, Vol. 44, No 1
Binmore, K., Rubinstein, A., Wolinsky, A. (1986), The Nash Bargaining Solution in Economic Modelling, RAND Journal of Economics, Vol. 17, No 2, pp. 176-188.
Corabae, D.,Temzelides, T. and Wright, R. (2002), Matching and Money, American Economic Review, Papers and Proceedings, 92, pp. 67-71.
Corabae, D.,Temzelides, T. and Wright, R. (2003), Direct Matching and Monetary Exchange, Econometrica, Vol. 71, No 3, pp. 731-756.
Engineer, M., Shi, S. (1998), Asymmetry, imperfectly transferable utility, and the role of fiat money in improving terms of trade, Journal of Monetary Economics, 41, pp. 153-183.
Engineer, M., Shi, S. (2001), Bargains, Barter, and Money, Review of Economic Dynamics, 4, 188-209.
Keynes, J.M. (1933) The distinction between a co-operative economy and an entrepreneur economy, The collected writings of John Maynard Keynes, vol. XXIX, London, Macmillan, 1979
Kiyotaki, N. and Wright, R. (1991) A Contribution to the Pure Theory of Money, Journal of Economic Theory, 53, 215-235
Kiyotaki, N. and Wright, R. (1993) A Search Theoretic Approach to Monetary Economics, American Economic Review, 83, 63-77
Rupert, P., Shindler, M., Shevchenko, A., Wright, R. (2000), The Search-Theoretic Approach to Monetary Economics: A Primer, Federal Reserve Bank of Cleveland Economic Review, v.36, iss.4, 10-28
Shi, S. (2006), Viewpoint: A Microfoundation of Monetary Economics, Canadian Journal of Economics, 39, 643-688
Trejos, A. and Wright, R. (1995), Search, Bargaining, Money and Prices, Journal of Political Economy, vol. 103, n.1