A Theory of Money and Financial Institutions. Part III. The Missing Degree of Freedom: Commodity Money and Oligopoly in a General Equilibrium Model,
YALE UNIV NEW HAVEN CONN COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
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It is suggested that an extra degree of freedom is needed to construct a symmetric noncooperative price game in a market with n monopolists trading in n goods. This calls for the introduction of an n1 good which can be interpreted as a commodity money. The quantity game is examined. Necessary conditions are shown for the replicated game to have its noncooperative equilibria approach the competitive equilibria of the replicated market. A shadow price is discussed in relation to monetary capacity constraints.
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