How long is forever in the laboratory? Three implementations of an infinite-horizon monetary economy

Abstract

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“…Experimental studies in other contexts also show that findings obtained by the random termination method are robust to the experimental method used to induce infinite horizon in the lab (see e.g. [ 41 , 42 ]).…”

The Friedman Rule: Experimental Evidence

“…They find that fiat money tends to promote efficiency in all environments, regardless of whether there is a monetary equilibrium. Jiang et al (2021a) also study the essentiality of money in finite-horizon environments. They show that production rates and efficiency are higher when monetary exchange is an equilibrium.…”

“…11 The use of random termination to implement indefinite horizons begins with Roth and Murnighan (1978). Alternative approaches include finite-horizon economies with final round coordination games or with uncertainty in the last position that avoid unraveling due to backward induction (see, e.g., Cooper and Kühn, 2014;Fréchette and Yuksel, 2017;Davis et al, 2020;Jiang et al, 2021a). Jiang et al (2021c) consider three different implementations of an infinite-horizon monetary economy and find that dynamic incentives are preserved in all.…”

“…Alternative approaches include finite-horizon economies with final round coordination games or with uncertainty in the last position that avoid unraveling due to backward induction (see, e.g., Cooper and Kühn, 2014;Fréchette and Yuksel, 2017;Davis et al, 2020;Jiang et al, 2021a). Jiang et al (2021c) consider three different implementations of an infinite-horizon monetary economy and find that dynamic incentives are preserved in all. We see alternatives to the random termination method as more complicated to implement, and we did not want to add further complexity to our design.…”

“…See Fréchette and Yuksel (2017) for different implementations of infinite-horizon economies in the context of infinitely repeated Prisoner's Dilemma games. Also, see Davis et al (2020) and Jiang et al (2021a) for theory and experiments in finite-horizon economies where money is valued. period to period but not from sequence to sequence.…”