Perfectly competitive bilateral exchange without discounting

Edward J. Green, Ruilin Zhou

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


In a random-matching economy of traders who maximize cumulative consumption (overtaking criterion), the stationary, Markov, Bayesian-perfect equilibrium is studied. At such equilibrium, two results hold: (1) perfect substitutability between current and future consumption implies a no-surplus condition; and (2) by the no-surplus condition, there is a nominal price at which all trades must occur. These results strengthen the seminal results of Ostroy (1973) regarding monetary bilateral exchange in two ways: the incentive compatibility of the equilibrium trading pattern is established and a less roundabout trading pattern enhances welfare by enabling consumption to occur more frequently.

Original languageEnglish (US)
Pages (from-to)121-131
Number of pages11
JournalJournal of Monetary Economics
Issue number2
StatePublished - Mar 2010

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


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