The Unique Minimal Cash Flow Competitive Equilibrium

Martin Shubik

No 806, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: The exchange economy E can be reformulated as a strategic market game. In particular the point of concern here involves the introduction of a specified amount of credit or fiat money to monetize exchange. Dubey and Shubik (1979) and Shubik and Wilson (1977) have studied the possibility of introducing a fixed amount M of money to finance trade. When one formulates exchange as a game of strategy using any form of credit or fiat money where there is any possibility whatsoever that an individual will be unable to pay back that which he has borrowed, the rules of the game require that the procedure to be followed in case of default must be specified. This is not a mere institutional detail but a logical necessity. It is however reasonable to expect that one might try to design a default penalty sufficiently harsh to discourage strategic default.

Keywords: Cash flow competitive equilibrium; strategic market games (search for similar items in EconPapers)
Pages: 7 pages
Date: 1986-10
Note: CFP 702.
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Citations: View citations in EconPapers (1)

Published in Economics Letters (1987), 27: 303-306

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