research
Monetary Exchange with Multilateral Matching
- Publication date
- Publisher
Abstract
This paper analyzes monetary exchange in a search model allowing
for multilateral matches to be formed, according to a standard urn-ball
process. We consider three physical environments: indivisible goods
and money, divisible goods and indivisible money, and divisible goods
and money. We compare the results with Kiyotaki and Wright (1993),
Trejos and Wright (1995), and Lagos and Wright (2005) respectively.
We Â…nd that the multilateral matching setting generates very simple
and intuitive equilibrium allocations that are similar to those in the
other papers, but which have important di¤erences. In particular, sur-
plus maximization can be achieved in this setting, in equilibrium, with
a positive money supply. Moreover, with ‡exible prices and directed
search, the Â…rst best allocation can be attained through price posting
or through auctions with lotteries, but not through auctions without
lotteries. Finally, analysis of the case of divisible goods and money
can be performed without the assumption of large families (as in Shi
(1997)) or the day and night structure of Lagos and Wright (2005)Matching, Money, Directed Search