2005/02/01 by Akihiko Matsui, Takashi Shimizu
Economics, Econometrics and Finance · #Economic theories and models #Economic Theory and Policy #Economic Theory and Institutions
paper · doi:10.1111/j.0020-6598.2005.00309.x
This article considers an infinitely repeated economy with divisible fiat money. The economy has many marketplaces that agents choose to visit. In each marketplace, agents are randomly matched to trade goods. There exist a variety of stationary equilibria. In some equilibrium, each good is traded at a single price, whereas in another, every good is traded at two different prices. There is a continuum of such equilibria, which differ from each other in price and welfare levels. However, it is shown that only the efficient single‐price equilibrium is evolutionarily stable.