A simple search model of money with heterogeneous agents and partial acceptability

Abstract

Simple search models have equilibria where some agents accept money and others do not. We argue such equilibria should not be taken seriously-which is unfortunate if one wants a model with partial acceptability. We introduce heterogeneous agents and show partial acceptability arises naturally. There can be multiple equilibria with different degrees of acceptability. Given the type of heterogeneity we allow, the model is still simple: equilibria reduce to fixed points in [0,1]. We show that with other forms of heterogeneity, equilibria are generally fixed points in set space, and there exists no method to reduce this to a problem in R 1 .

Liquidity: A New Monetarist Perspective

“…The 17 SeeMills (2008),Wallace (2010Wallace ( ,2013Wallace ( ,2014, andDeviatov and Wallace (2014) for more applications. Related but different studies of banking in this kind of model includeCavalcanti et al ( ,2005,Cavalcanti (2004),He et al (2005) andLester (2009).18 In particular, everything is indivisible, and that does drive some results Shevchenko and Wright (2004). argue that any equilibrium with partial acceptability,   ∈ (0 1), is an artifact of indivisibility, but then show how adding heterogeneity yields a similar multiplicity and robust partial acceptability.…”

On Market Activity and the Value of Money

“…In short, a high-valued currency generates positive intensive and extensive margin effects. Shevchenko and Wright's (2004) study of an indivisible-goods heterogeneous agents matching model has similar implications. They endogenize the acceptability of money and find equilibrium multiplicity is possible.…”

Heterogeneity and Lotteries in Monetary Search Models

“…The environment is Kiyotaki and Wright (1993) with ex ante heterogeneous preferences as in Shevchenko and Wright (2004). There is a continuum of infinitely lived agents on the unit interval.…”