Economics at your fingertips  

On the optimality of monetary trading

Guilherme Carmona

Economic Theory, 2021, vol. 71, issue 3, No 10, 1160 pages

Abstract: Abstract People have long been trading in a “monetary” way. This persistence of monetary trading suggests that it might be an efficient trading mechanism. We formalize this intuition in a random-matching, absence-of-double-coincidence-of-wants environment. The record-keeping technology is operated by an information-processing center which summarizes and updates individuals’ past trading behavior in a binary variable. A trading mechanism consists of an updating rule and an individual trading behavior rule. To capture the difficulties in collecting and processing information about others’ past behavior, we assume that the center faces costs, both fixed and variable, to operate. We show that (1) any non-autarkic equilibrium trading mechanism is, in terms of aggregate variables (such as consumption and frequency of trade), observationally equivalent to a monetary trading mechanism and (2) any non-autarkic optimal equilibrium trading mechanism is a monetary trading mechanism.

Keywords: Monetary trading; Memory; Trading mechanisms (search for similar items in EconPapers)
JEL-codes: C73 D82 E40 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

DOI: 10.1007/s00199-019-01219-2

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2023-05-10
Handle: RePEc:spr:joecth:v:71:y:2021:i:3:d:10.1007_s00199-019-01219-2