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Reconsidering Money: Monetary Exchange with Additive Transaction Costs

Philipp J. H. Schroeder
Authors registered in the RePEc Author Service: Philipp J.H. Schröder

Journal of Institutional and Theoretical Economics (JITE), 2001, vol. 157, issue 2, 301-318

Abstract: Under the assumption of purely additive transaction costs in exchange, the literature on money has a standard example of direct exchange dominating indirect (monetary) exchange. From here, it is frequently concluded that subadditive costs (e.g., search costs) must be examined in order to explain the institution or origin of money. In contrast, this paper presents an additive transaction costs model in which the mere absence of double coincidences of wants suffices to motivate monetary exchange. Furthermore, it is found that not all commodity monies that are collectively desirable qualify for the core, but that all fiat monies that are collectively desirable will be elements of the core.

JEL-codes: D70 E40 (search for similar items in EconPapers)
Date: 2001
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