On the Optimality of Monetary Trading

Carmona, Guilherme (2019) On the Optimality of Monetary Trading Economic Theory.

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Abstract

People have long been trading in a "monetary" way. This persistence of monetary trading suggests that it might be an efficient trading mechanism. We formalize this intuition in a random-matching, absence-of-double-coincidence-of-wants environment. The record-keeping technology is operated by an information-processing center which summarizes and updates individuals' past trading behavior in a binary variable. A trading mechanism consists of an updating rule and an individual trading behavior rule. To capture the difficulties in collecting and processing information about others' past behavior, we assume that the center faces costs, both fixed and variable, to operate. We show that any non-autarkic equilibrium trading mechanism is, in terms of aggregate variables (such as consumption and frequency of trade), observationally equivalent to a monetary trading mechanism and any non-autarkic optimal equilibrium trading mechanism is a monetary trading mechanism.

Item Type:	Article
Divisions :	Faculty of Arts and Social Sciences > School of Economics
Authors :	Name Email ORCID Carmona, Guilherme g.carmona@surrey.ac.uk
Date :	2019
Funders :	British Academy, Leverhulme Trust
Copyright Disclaimer :	© Springer-Verlag GmbH Germany, part of Springer Nature 2019. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Related URLs :	Publisher
Depositing User :	Clive Harris
Date Deposited :	30 Jul 2019 08:20
Last Modified :	30 Jul 2019 08:22
URI:	http://epubs.surrey.ac.uk/id/eprint/852328

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