《Trade using one commodity as a means of payment》.pdf

Trade Using One Commodity as a Means of Payment Author(s): Lloyd Shapley and Martin Shubik Reviewed work(s): Source: Journal of Political Economy, Vol. 85, No. 5 (Oct., 1977), pp. 937-968 Published by: The University of Chicago Press Stable URL: /stable/1830340 . Accessed: 04/04/2012 11:42 Your use of the JSTOR archive indicates your acceptance of the Terms Conditions of Use, available at . /page/info/about/policies/terms.jsp JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@. The University of Chicago Press is collaborating with JSTOR to digitize, preserve and extend access to Journal of Political Economy. Trade Using One Commodity as a Means of Payment LloydShapley Rand Corporation MartinShubik Yale University A general model of noncooperative trading equilibrium is described in which prices depend in a natural way on the buying and selling decisions of the traders, avoiding the classical assumption that individuals must regard prices as fixed. The key to the approach is the use of a single, specified commodity as cash, which may or may not have intrinsic value. The model, in several variants, is treated as a noncooperative game, in the spirit of Nash and Cournot. The rules of the game, including the price-forming mechanism, are independent of behavioral or equilibrium assumptions, which enter, instead, through the solutions of the game. I. Introduction In the development of a theory of money and financial institutions, there are three kinds of questions which should be clearly differentia