Contagion Equilibria in a Monetary Model

Aliprantis, Charalambos D.; Camera, Gabriele; Puzzello, Daniela

doi:10.2139/ssrn.2541955

Cited by 14 publications

(20 citation statements)

References 12 publications

(11 reference statements)

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“…3 Given a finite population of sufficiently patient agents, there exists a continuum of nonmonetary gift-exchange equilibria in addition to the monetary equilibrium; these gift-exchange equilibria are supported by a contagious grim-trigger strategy played by the society of agents as a whole (Kandori, 1992). Some of these gift-exchange equilibria Pareto dominate the monetary equilibrium implying that money may fail to be essential (e.g., Aliprantis, Camera, & Puzzello, 2007a, 2007bAraujo, 2004;Araujo, Camargo, Minetti, & Puzzello, 2012). However, Duffy and Puzzello find that subjects avoid nonmonetary gift-exchange equilibria in favor of coordinating on the monetary equilibrium.…”

Section: Related Literaturementioning

confidence: 99%

“…However, Duffy and Puzzello find that subjects avoid nonmonetary gift-exchange equilibria in favor of coordinating on the monetary equilibrium. Duffy and Puzzello also study versions of the model when money is not available (see Aliprantis et al, 2007a, 2007band Araujo et al, 2012 and find that welfare is significantly higher in environments with money than without money, suggesting that money plays a key role as an efficiency enhancing coordination device. Camera and Casari (2014) also compare outcomes across two environments, with fiat money ("tickets") and without fiat money.…”

Section: Related Literaturementioning

confidence: 99%

“…Notice that the environment lacks commitment and formal enforcement. However, since our population is finite, in addition to the monetary equilibrium, there exist multiple nonmonetary equilibria supported by informal enforcement schemes (see Aliprantis et al, 2007aAliprantis et al, , 2007bAraujo et al, 2012;Ellison, 1994;Kandori, 1992).…”

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confidence: 99%

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Experimental Evidence on the Essentiality and Neutrality of Money in a Search Model

Duffy¹,

Puzzello²

2014

Research in Experimental Economics

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We study a microfounded search model of exchange in the laboratory. Using a within-subjects design, we consider exchange behavior with and without an intrinsically worthless token object. While these tokens have no redemption value, like fiat money they may foster greater exchange and welfare via the coordinating role of having prices of goods in terms of tokens. We find that welfare is indeed improved by the presence of tokens provided that the economy starts out with a supply of such tokens. In economies that operate for some time without tokens, the later surprise introduction of tokens does not serve to improve welfare. We also explore the impact of announced changes in the economy-wide stock of tokens (fiat money) on prices. Consistent with the quantity theory of money, we find that increases in the stock of money (tokens) have no real effects and mainly result in proportionate changes to prices.

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Section: Related Literaturementioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

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Experimental Evidence on the Essentiality and Neutrality of Money in a Search Model

Duffy¹,

Puzzello²

2014

Research in Experimental Economics

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“…However, a challenge in the literature is to keep track of the endogenous distribution of money, which makes policy analysis di¢ cult without restricting the divisibility of money and goods, or relying on sophisticated computation methods, see Molico (2006). 1 It was not until the seminal work by Lagos and Wright (2005, hereby LW) that researchers can work with an environment which allows divisible money and divisible goods, but at the same time keeps the distribution of money balance degenerate. The key trick in LW is to assume quasi-linear preferences.…”

Section: Introductionmentioning

confidence: 99%

A Tractable Monetary Model under General Preferences

Wong

2015

Review of Economic Studies

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“…The use of tokens as a fiat money helps players in coordinating on high-payoff equilibria, especially when groups are large. The related paper in Duffy and Puzzello (2014) adds a centralized market to this basic setup to test the model in Aliprantis et al (2007). Here, too, fiat monetary systems emerge, although this occurs primarily when groups are sufficiently small.…”

Section: Related Experimental Literaturementioning

confidence: 99%

Endogenous Market Formation and Monetary Trade: An Experiment

2016

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe theory of money typically ignores the fact that the mode of market interaction arises endogenously, and simply assumes a decentralized, bilateral exchange process. However, endogenizing the organization of trade is critical for understanding the conditions that lend themselves to the development of money as a mode of exchange. To study this, we develop a "travelling game" to study the spontaneous emergence of different systems of exchange theoretically and experimentally. Players located on separate "islands" can either stay and trade on their island, or pay a cost to trade elsewhere. Earnings rise with the frequency of trade but fall with the frequency of travel. Decentralized and centralized markets can both emerge in equilibrium. The latter maximize consumption frequencies and are socially efficient; the former minimize travel cost and require the use of a medium of exchange. In the laboratory, a centralized market more frequently emerges when subjects perform diversified economic tasks, and when * We thank Avihood Baron, Avichai Chachmon, Inbal Dekel, Isi Feder and Uriel Rochev for research and programming assistance, as well as seminar participants at the Technical University of Berlin and participants at the 2013 and 2015 SAET Meetings and the 2015 ESA International Meetings for comments. D. Goldberg and A.

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Contagion Equilibria in a Monetary Model

Cited by 14 publications

References 12 publications

Experimental Evidence on the Essentiality and Neutrality of Money in a Search Model

Experimental Evidence on the Essentiality and Neutrality of Money in a Search Model

A Tractable Monetary Model under General Preferences

Endogenous Market Formation and Monetary Trade: An Experiment

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