Existence of a continuum of equilibria in a monetary random-matching model

Hideko Ishihara
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Hideko Ishihara: Senshu University

Review of Economic Dynamics, 2010, vol. 13, issue 4, 886-898

Abstract: In this paper, we study a monetary random-matching model where both goods and money are perfectly divisible, production is costly, and there is no exogenous upper bound on agents' money holdings, information on which is private to the agent. We show that there is a continuum of stationary equilibria where agents have either no money or a set amount, and buyers spend all their money. As in the previous studies, the equilibrium value function is step-like, which emerges as a self-fulfilling prophecy. The endogenous upper bound on agents' money holdings is the result of private information on agents' money holdings. Buyers post an offer that is accepted only by sellers without money, who set a higher value on money. (Copyright: Elsevier)

Keywords: Money; Random-matching model; Indeterminacy (search for similar items in EconPapers)
JEL-codes: D83 E40 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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DOI: 10.1016/j.red.2010.04.001

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