Everything But the Powers of 2 and 3
16 Pages Posted: 25 Aug 2007
Date Written: August 22, 2007
In this paper, we generalize the power-of-2 and the power-of-3 monetary denomination systems (MDS) widely studied in the literature by considering the class of the power-of-α MDSs for all real α strictly between 1 and infinity. We show that for theoretical distributions of prices as well as for an actually observed distribution of prices, the power-of-2 and the power-of-3 MDSs are never the most efficient MDSs.
Keywords: Currency denomination, Monetary Denomination Efficiency
JEL Classification: E4, E47
Suggested Citation: Suggested Citation