Inside and Outside Money, with an Application to the Russian Virtual Economy

Svetlana Boyarchenko () and Sergei Levendorskii
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Sergei Levendorskii: The University of Texas at Austin

Macroeconomics from EconWPA

Abstract: We analyze the endogenous appearance of money substitutes, their interaction with outside money, and resulting distortions in the price system of an economy with large monopolies and wide-spread informal networks. The economy consists of productive, individually optimizing agents and less productive colluding agents who issue universally acceptable money substitutes. We distinguish equilibria by types of exchange both between agents of one type and between those of different types and show that for small trading frictions, only three types of equilibria can be sustained. A novelty of the analysis is that the agents issuing money substitutes survive by their collusion.

Keywords: money substitutes; search; collusion; trading frictions. (search for similar items in EconPapers)
JEL-codes: E31 E52 O23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cis, nep-cwa, nep-eec, nep-mon and nep-tra
Date: 2004-05-11
Note: Type of Document - pdf; pages: 22
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0405009

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