Document Type
Article
Publication Date
2004
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.
Recommended Citation
Berentsen, A., Camera, G., & Waller, C. (2004). The distribution of money and prices in an equilibrium with lotteries. Economic Theory, 24(4), 887–906. http://doi.org/10.1007/s00199-004-0485-5
Peer Reviewed
1
Copyright
Springer
Comments
This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Economic Theory, volume 24, issue 4, in 2004 following peer review. The final publication is available at Springer via DOI: 10.1007/s00199-004-0485-5