Perfectly competitive bilateral exchange without discounting

Edward J. Green; Ruilin Zhou

doi:10.1016/j.jmoneco.2010.01.001

Perfectly competitive bilateral exchange without discounting

Edward J. Green
, Ruilin Zhou

Economics

Research output: Contribution to journal › Article › peer-review

1 Scopus citations

Abstract

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 language	English (US)
Pages (from-to)	121-131
Number of pages	11
Journal	Journal of Monetary Economics
Volume	57
Issue number	2
DOIs	https://doi.org/10.1016/j.jmoneco.2010.01.001
State	Published - Mar 2010

All Science Journal Classification (ASJC) codes

Finance
Economics and Econometrics

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10.1016/j.jmoneco.2010.01.001

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title = "Perfectly competitive bilateral exchange without discounting",

abstract = "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.",

author = "Green, \{Edward J.\} and Ruilin Zhou",

note = "Funding Information: We thank the editor for very helpful suggestions about both the exposition and the focus of the paper. Ruilin Zhou's research was supported by the National Science Foundation Copyright: Copyright 2010 Elsevier B.V., All rights reserved.",

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AU - Green, Edward J.

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N1 - Funding Information: We thank the editor for very helpful suggestions about both the exposition and the focus of the paper. Ruilin Zhou's research was supported by the National Science Foundation Copyright: Copyright 2010 Elsevier B.V., All rights reserved.

PY - 2010/3

Y1 - 2010/3

N2 - 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.

AB - 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.

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JO - Journal of Monetary Economics

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ER -

Perfectly competitive bilateral exchange without discounting

Abstract

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