1 research outputs found
Graphical Exchange Mechanisms
Consider an exchange mechanism which accepts diversified offers of various
commodities and redistributes everything it receives. We impose certain
conditions of fairness and convenience on such a mechanism and show that it
admits unique prices, which equalize the value of offers and returns for each
individual.
We next define the complexity of a mechanism in terms of certain integers
and that represent the time required to exchange
for , the difficulty in determining the exchange ratio, and the
dimension of the message space. We show that there are a finite number of
minimally complex mechanisms, in each of which all trade is conducted through
markets for commodity pairs.
Finally we consider minimal mechanisms with smallest worst-case complexities
and . For commodities, there are
precisely three such mechanisms, one of which has a distinguished commodity --
the money -- that serves as the sole medium of exchange. As the money mechanism is the only one with bounded .Comment: 26 page