TY - JOUR
T1 - Perfectly competitive bilateral exchange without discounting
AU - Green, Edward J.
AU - Zhou, Ruilin
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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U2 - 10.1016/j.jmoneco.2010.01.001
DO - 10.1016/j.jmoneco.2010.01.001
M3 - Article
AN - SCOPUS:76349112932
VL - 57
SP - 121
EP - 131
JO - Carnegie-Rochester Confer. Series on Public Policy
JF - Carnegie-Rochester Confer. Series on Public Policy
SN - 0304-3932
IS - 2
ER -