The distribution of money and prices in an equilibrium with lotteries

Aleksander Berentsen, Gabriele Camera and Christopher Waller

Economic Theory, 2004, vol. 24, issue 4, 887-906

Abstract: We construct a tractable ‘fundamental’ model of money with equilibrium heterogeneity in money balances and prices. We do so by considering randomized monetary trades in a standard search-theoretic model of money where agents can hold multiple units of indivisible ‘tokens’ and can offer lotteries on monetary transfers. By studying a simple trading pattern, we can analytically characterize the monetary distribution. Interestingly, such distributions match those observed in numerically simulated economies with fully divisible money and price heterogeneity. Copyright Springer-Verlag Berlin/Heidelberg 2004

Keywords: Lotteries; Money distribution; Price dispersion; Search. (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (19)

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Related works:
Chapter: The distribution of money and prices in an equilibrium with lotteries (2006)
Working Paper: The Distribution of Money and Prices in an Equilibrium with Lotteries
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DOI: 10.1007/s00199-004-0485-5

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