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American Economic Review: Vol. 89 No. 4 (September 1999)

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Emergence of Money as a Medium of Exchange: An Experimental Study

Article Citation

Duffy, John, and Jack Ochs. 1999. "Emergence of Money as a Medium of Exchange: An Experimental Study." American Economic Review, 89(4): 847-877.

DOI: 10.1257/aer.89.4.847

Abstract

This paper reports findings from an experiment that implements a search-theoretic model of money as a medium of exchange. The question examined is whether subjects learn to adopt the same commodities as media of exchange that the model predicts will be used in equilibrium. We report that subjects have a strong tendency to play "fundamental" rather than "speculative" strategies even in environments where speculative strategies yield higher payoffs. We examine some possible motivations for subjects' behavior and conclude that subjects are mainly motivated by past payoff experience as opposed to the marketability considerations that the theory emphasizes.

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Authors

Duffy, John (U Pittsburgh)
Ochs, Jack (U Pittsburgh)

JEL Classifications

E40: Money and Interest Rates: General
D83: Search; Learning; Information and Knowledge; Communication; Belief


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