Is Money Essential? An Experimental Approach

By:

Jiang, Janet Hua

Contributor(s):

Material type:

Continuing resourcePublication details: Journal of Political Economy; 2024Description: 2972-2998ISSN:

0022-3808

Subject(s):

Online resources:

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Summary: Monetary exchange is called essential when better outcomes become incentive compatible when money is introduced. We study essentiality theoretically and experimentally using finite-horizon monetary models that are naturally suited to the lab. Following mechanism design, we also study the effects of strategy recommendations both when they are incentive compatible and when they are not. Results show that output and welfare are significantly enhanced by fiat currency if monetary equilibrium exists but not otherwise. Also, recommendations help if incentive compatible but not otherwise. Sometimes money gets used when it should not, and we investigate why, using surveys and measures of social preferences.

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Holdings
Item type	Current library	Call number	Vol info	Status	Date due	Barcode
Article Index	Dr VKRV Rao Library		Vol. 132, No. 9	Not for loan		AI742

Monetary exchange is called essential when better outcomes become incentive compatible when money is introduced. We study essentiality theoretically and experimentally using finite-horizon monetary models that are naturally suited to the lab. Following mechanism design, we also study the effects of strategy recommendations both when they are incentive compatible and when they are not. Results show that output and welfare are significantly enhanced by fiat currency if monetary equilibrium exists but not otherwise. Also, recommendations help if incentive compatible but not otherwise. Sometimes money gets used when it should not, and we investigate why, using surveys and measures of social preferences.

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