A Strategic Market Game with a Mutual Bank with Fractional Reserves and Redemption in Gold (A Continuum of Traders)

Martin Shubik and Dimitrios Tsomocos

No 964, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We utilize the strategic market game approach to analyze the role and function of a mutual bank with variable fractional reserves, redemption in gold and endogenous interest rate formation. We specify the conditions of enough money and its distribution. Using the continuum of traders model, we show existence and optimality for the case of no bankruptcy as well as for the case in which there exists the potentiality of bankruptcy. Finally, we analyze the relationship of the gearing ratio and the bankruptcy penalty with respect to the resulting equilibrium allocations.

Keywords: Banking; interest rates; bankruptcy; credit; money supply (search for similar items in EconPapers)
JEL-codes: E43 E51 G21 G33 (search for similar items in EconPapers)
Pages: 24 pages
Date: 1990-12
Note: CFP 812.
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Citations: View citations in EconPapers (2)

Published in Journal of Economics (1992), 55(2): 123-150

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