On the Micro-Foundations of Money: The Capitol Hill Baby-Sitting Co-Op
Zurich IEER Working Paper No. 108
31 Pages Posted: 13 Mar 2002 Last revised: 23 Dec 2011
There are 2 versions of this paper
On the Micro-Foundations of Money: The Capitol Hill Baby-Sitting Co-Op
On the Micro-Foundations of Money: The Capitol Hill Baby-Sitting Co-Op
Date Written: March 1, 2002
Abstract
We suggest a new micro-foundation of money in which markets are well-organized but consumers' preferences are stochastic. In this model, we solve for stationary equilibria and show that there is an optimum quantity of money. The rational solution of our model is compared with actual behavior in a laboratory experiment. It turns out that the experiment gives support to our theoretical results.
Keywords: micro foundations of money, optimal quantity of money
JEL Classification: C91, C92, D83, E41, E51
Suggested Citation: Suggested Citation