English, Article, Journal or magazine article edition: Money, Intermediaries and Cash-in-Advance Constraints Christian Hellwig

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Bookmark: http://trove.nla.gov.au/version/45502
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Money, Intermediaries and Cash-in-Advance Constraints
Author
  • Christian Hellwig
Physical Description
  • preprint
Notes
  • I study a search economy in which intermediaries are the driving force co-ordinating the economy on the use of a unique, common medium of exchange for transactions. If search frictions delay trade, intermediaries offering immediate exchange opportunities can make arbitrage gains from a price spread. As these intermediaries take over transactions, they are confronted to the double coincidence problem of the search market. In the model presented here, intermediaries solve this problem best by imposing a common medium of exchange to other agents, such that a Cash-in-Advance constraint holds: Agents trade twice in order to consume, once to exchange their production against the medium of exchange, and once to receive their consumption good. To select between multiple equilibria, I introduce a criterion of minimal coalition proofness, whereby arbitrarily small coalitions may induce a change from an equilibrium. I show that any minimally coalition-proof equilibrium is Pareto-efficient, and characterize the full set of minimally coalition-proof equilibria of this economy.
  • RePEc:fmg:fmgdps:dp349
  • I study a search economy in which intermediaries are the driving force co-ordinating the economy on the use of a unique, common medium of exchange for transactions. If search frictions delay trade, intermediaries offering immediate exchange opportunities can make arbitrage gains from a price spread. As these intermediaries take over transactions, they are confronted to the double coincidence problem of the search market. In the model presented here, intermediaries solve this problem best by imposing a common medium of exchange to other agents, such that a Cash-in-Advance constraint results: Agents trade twice in order to consume, once to exchange their production against the medium of exchange, and once to receive their consumption good. To select between multiple equilibria, I introduce a criterion of minimal coalition proofness, whereby arbitrarily small coalitions may induce a change from one equilibrium to another. I show that any minimally coalition-proof equilibrium is Pareto-efficient, and characterize the full set of minimally coalition-proof equilibria of this economy.
  • RePEc:ecm:wc2000:1631
Language
  • English
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