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The Distribution of Money and Prices in an Equilibrium with Lotteries

Zurich IEER Working Paper No. 174

30 Pages Posted: 7 Feb 2005

See all articles by Aleksander Berentsen

Aleksander Berentsen

University of Basel - Faculty of Business and Economics; CESifo (Center for Economic Studies and Ifo Institute)

Gabriele Camera

Chapman University - Economic Science Institute; University of Bologna - Dept. of Economics

Christopher J. Waller

Federal Reserve Banks - Federal Reserve Bank of St. Louis; University of Notre Dame - Department of Economics

Date Written: January 14, 2004

Abstract

We construct a tractable model of divisible money and equilibrium heterogeneity in money balances and prices. We do so by considering randomized monetary trades in a standard search-theoretic model of money where agents can hold multiple units of indivisible 'tokens'. By studying a simple trading pattern, we can generate monetary distributions that match those observed in numerically simulated economies with fully divisible money and price heterogeneity.

Keywords: Money, Search, Lotteries, Price Dispersion, Wealth Distribution

JEL Classification: E40, D83

Suggested Citation

Berentsen, Aleksander and Camera, Gabriele and Waller, Christopher J., The Distribution of Money and Prices in an Equilibrium with Lotteries (January 14, 2004). Zurich IEER Working Paper No. 174, Available at SSRN: https://ssrn.com/abstract=495381 or http://dx.doi.org/10.2139/ssrn.495381

Aleksander Berentsen (Contact Author)

University of Basel - Faculty of Business and Economics ( email )

Petersplatz 1
Basel, 4001
Switzerland

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Gabriele Camera

Chapman University - Economic Science Institute ( email )

1 University Drive
Orange, CA 92866
United States

HOME PAGE: http://www1.chapman.edu/~camera/

University of Bologna - Dept. of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Christopher J. Waller

Federal Reserve Banks - Federal Reserve Bank of St. Louis

411 Locust St
Saint Louis, MO 63011
United States

University of Notre Dame - Department of Economics ( email )

434 Flanner Hall
Notre Dame, IN 46556
United States
574-631-4963 (Phone)
574-631-9238 (Fax)

HOME PAGE: http://www.nd.edu/~cwaller/

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