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- Title
A note on asymmetric and mixed strategy equilibria in the search-theoretic model of fiat money.
- Authors
Wright, Randall
- 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.
- Subjects
MONEY; SEARCH theory; NASH manifolds; CURRENCY question; ECONOMIC models
- Publication
Economic Theory, 1999, Vol 14, Issue 2, p463
- ISSN
0938-2259
- Publication type
Article
- DOI
10.1007/s001990050304