A selection mechanism for the barter equilibrium in the search theoretic monetary model

Economics Bulletin, 2008, vol. 5, issue 2, pages 1-10

Abstract: We modify the standard Kiyotaki-Wright model (1993) in order to add an autarkic option in the agents' choice set. The value of the autarkic option is independent of strategic coordination problems and represents a sort of reservation utility with respect to exchange activity. This allows us to identify the conditions under which we can rule out the barter equilibrium as an exchange coordination outcome. These conditions concern the value of the inter-temporal rate of preference, the total amount of money and the rate of return of the matching technology.

Keywords: Autarky; Barter; Money; Search (search for similar items in EconPapers)
JEL-codes: E0 (search for similar items in EconPapers)
Date: 2008-01-19
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