COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 349 "Money and the Decentralization of Exchange" Joseph M. Ostroy and Ross M. Starr 1973 A pairwise trading process is formulated subject to conditions of nonnegativity of traders’ holdings and quid pro quo. It is shown that that: (i) There is a centralized procedure that achieves the equilibrium allocation for an arbitrary economy. (ii) It is not in general possible to find a decentralized procedure that achieves the equilibrium allocation for an arbitrary economy. (iii) In a monetary economy there is a decentralized procedure that achieves the equilibrium allocation. The usefulness of money is that it allows decentralization of the trading process. See CFP 422 |
