Money and Prices: A Model of Search and Bargaining

On the Threat of Counterfeiting

“…3 This is precisely the approach of Nosal and Wallace (2007) -NW hereafter -who study counterfeiting using the o¤-the-shelves monetary model of Shi (1995) and Trejos and Wright (1995). They derive two main implications: Counterfeiting of currency 1 According to "The use and counterfeiting of United States currency abroad," Part 3, Section 6.6, the cost to produce reasonably deceptive counterfeits could be as low as $300.…”

Indivisibilities, Lotteries, and Monetary Exchange

“…Moreover, lotteries allow us to discuss a notion of prices, even with indivisible goods and money, since is the average amount of currency that trades for a good. 2 Now consider the model with divisible consumption goods, where even if we continue to assume that money is indivisible and agents have a unit storage capacity, prices can be determined by letting agents bargain over the quantity of goods buyers get for a unit of currency (Shi [1995]; Trejos and Wright [1995]). Agents again bargain over the joint probability distribution of (q; m), but now q 2 [0; 1).…”

On the efficiency of monetary exchange: how divisibility of money matters

“…& . 393 4(5(6(78% 0**=6 3(#$*># 8*##%r(%6 In this subsection we explore how the mismatch problem a"ects the outcome when the terms of trade are endogenized along the lines of Shi (1995) and Trejos and Wright (1995).…”