COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 903

"The Transactions Cost of Money (A Strategic Market Game Analysis)"

Martin Shubik and Shuntian Yao

March 1989

The payments system of a modern economy is a peculiar mix of technological and institutional factors. Trade takes time and involves some form of money or credit. Going to the bank or arranging credits is expensive. Baumol (1952) and Tobin (1956) address the costs of transactions. However both the Baumol and the Tobin analysis was carried out in a partial equilibrium context. Here we address the task of considering the costs of banking in a closed strategic market game.

JE Classification: 021, 022, 213

Keywords: Strategic game, exchange economy, transaction costs

See CFP 789