A note on asymmetric and mixed strategy equilibria in the search-theoretic model of fiat money

Randall Wright

Economic Theory, 1999, vol. 14, issue 2, 463-471

Abstract: The simple search-theoretic model of fiat money has three symmetric Nash equilibria: all agents accept money with probability 1; all agents accept money with probability 0; and all agents accept money with probability y in (0,1). Here I construct an asymmetric pure strategy equilibrium, payoff-equivalent to the symmetric mixed strategy equilibrium, where a fraction N in (0,1) of agents always accept money and 1-N never accept money. Counter to what has been conjectured previously, I find N > y. I also introduce evolutionary dynamics, and show that the economy converges to monetary exchange iff the initial proportion of agents accepting money exceeds N.

Keywords: Money; Search; ·; Nash; equilibrium. (search for similar items in EconPapers)
Date: 1999-08-24
Note: Received: September 10, 1997; revised version: April 24, 1998
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Citations: View citations in EconPapers (6)

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