Intrinsically Worthless Objects as Media of Exchange: Experimental Evidence

John Duffy and Jack Ochs
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Jack Ochs: University of Pittsburgh, USA

International Economic Review, 2002, vol. 43, issue 3, 637-674

Abstract: This article reports results from an experiment that examines whether an intrinsically worthless, "token" object serves as a medium of exchange in a laboratory implementation of Kiyotaki and Wright's search model of money. The theory admits Nash equilibria in which the token object is or is not used as a medium of exchange. We find that subjects nearly always offer to trade for the token object when such a trade lowers their storage costs. However, subjects frequently refuse to offer to trade the token object for more costly-to-store goods when the theory predicts they should make such trades. Copyright Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association

Date: 2002
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