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The Unique Minimal Cash Flow Competitive Equilibrium

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Abstract

The exchange economy E can be reformulated as a strategic market game. In particular the point of concern here involves the introduction of a specified amount of credit or fiat money to monetize exchange. Dubey and Shubik (1979) and Shubik and Wilson (1977) have studied the possibility of introducing a fixed amount M of money to finance trade. When one formulates exchange as a game of strategy using any form of credit or fiat money where there is any possibility whatsoever that an individual will be unable to pay back that which he has borrowed, the rules of the game require that the procedure to be followed in case of default must be specified. This is not a mere institutional detail but a logical necessity. It is however reasonable to expect that one might try to design a default penalty sufficiently harsh to discourage strategic default.

Suggested Citation

  • Martin Shubik, 1986. "The Unique Minimal Cash Flow Competitive Equilibrium," Cowles Foundation Discussion Papers 806, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:806
    Note: CFP 702.
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    Cited by:

    1. Martin Shubik & D.P. Tsomocos, 1990. "A Strategic Market Game with a Mutual Bank with Fractional Reserves and Redemption in Gold (A Continuum of Traders)," Cowles Foundation Discussion Papers 964, Cowles Foundation for Research in Economics, Yale University.
    2. Martin Shubik, 1986. "Enough Commodity Money and the Selection of a Unique Competitive Equilibrium," Cowles Foundation Discussion Papers 804, Cowles Foundation for Research in Economics, Yale University.

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