The Distribution of Money and Prices in an Equilibrium with Lotteries
Zurich IEER Working Paper No. 174
30 Pages Posted: 7 Feb 2005
Date Written: January 14, 2004
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: Suggested Citation