Social Norms and Monetary Trading

Guilherme Carmona ()

Macroeconomics from EconWPA

Abstract: Random matching models have been used in Monetary Economics to argue that money can increase the well being of all agents in the economy. If the model features a finite number of agents it will be shown that there is an equilibrium, analogous to the contagious equilibria described in Kandori (1992), that Pareto dominates the monetary one. However it will be shown also that monetaty equilibria have two important advantages: firstly, they are more plausible in large economies in the sense that the lowest discount factor compatible with monetary equilibria doesn't depend on the population size, which is not the case with contagious equilibria; secondly, it is more stable to finite deviations in the following sense: no matter what the past has been, future play of the equilibrium strategies will give players the same payoff as if the equilibrium strategies were always followed.

Keywords: Monetary trading; social norms (search for similar items in EconPapers)
JEL-codes: E40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2004-02-27
Note: Type of Document - pdf; prepared on winxp; to print on general; pages: 20; figures: 0. none
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Working Paper: Social Norms and Monetary Trading (2002)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0402030

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