COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 871

"Gold, Liquidity and Secured Loans in a Multistage Economy"

Martin Shubik and Shuntian Yao

March 1988

A multiperiod exchange economy with gold used both as money and as jewelry is examined in this paper. The existence of Nash equilibria is proved for the market games with finitely many traders as well as the games with a continuum of traders. For market games with a continuum of traders at infinite horizon, the existence of stationary Nash equilibria has been proved under the assumption that gold is properly distributed at the beginning or a secured loan between traders is available.

JEL Classification: 021, 026, 311

Keywords: Gold, exchange economy, Nash equilibrium, trading