Endogenous Matching and Money with Random Consumption Preferences

21 Pages Posted: 13 Apr 2014 Last revised: 22 May 2018

Thomas L. Hogan

Rice University - Baker Institute for Public Policy

William J. Luther

Florida Atlantic University; American Institute for Economic Research

Date Written: April 10, 2014

Abstract

Current money matching models employ either random matching or endogenous matching processes, both of which oversimplify the problem. We maintain that although most economic interactions are intentional, randomness still exists in consumption preferences. We offer an endogenous matching model of money with random consumption preferences. Our model preserves the intentionality of economic interactions while leaving scope for chance. We compare the potential monetary and nonmonetary equilibria to other endogenous matching and random matching models. We then consider the effects of government transaction policy and find that, consistent with earlier studies, government policy can prevent nonmonetary equilibria and create monetary equilibria.

Keywords: Money matching, Random matching, Endogenous matching, Monetary equilibrium, Monetary policy

JEL Classification: C78, E41, E42, E50

Suggested Citation

Hogan, Thomas L. and Luther, William J., Endogenous Matching and Money with Random Consumption Preferences (April 10, 2014). AIER Sound Money Project Working Paper No. 2018-11. Available at SSRN: https://ssrn.com/abstract=2423949 or http://dx.doi.org/10.2139/ssrn.2423949

Thomas L. Hogan (Contact Author)

Rice University - Baker Institute for Public Policy ( email )

6100 Main Street, MS-40
Houston, TX 77005
United States

William J. Luther

Florida Atlantic University ( email )

5353 Parkside Dr
Jupiter, FL 33458
United States

HOME PAGE: http://www.wluther.com

American Institute for Economic Research ( email )

PO Box 1000
Great Barrington, MA 01230
United States

HOME PAGE: http://www.aier.org/staff/william-j-luther

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