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A Stability Analysis of a Multiple Denomination Equilibrium

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Authors
Huang, Pidong
Issue Date
2015-10
Publisher
Institute of Economic Research, Seoul National University
Citation
Seoul Journal of Economics, Vol.28 No.4, pp. 389-414
Keywords
Random matching modelCarrying costDenominationInstabilityDeterminacy
Abstract
We consider existence and stability in a simple version of Lee et al. (2005). For a sufficiently large discount factor, a steady state of full ― support wealth distribution and pure strategy exists, whereas for an intermediate discount factor, a steady state of mixed strategy exists. Both steady states are locally stable and determinate. All denominations are circulated in the mixed-strategy steady state, whereas larger denominations are not held in the other steady state. We also show that nonfull-support steady states exist, and are stable and indeterminate. This finding is in sharp contrast to that of Huang, and Igarashi (2014), which show instability of nonfull-support steady states in Lee et al. (2005)
ISSN
1225-0279
Language
English
URI
https://hdl.handle.net/10371/94688
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.28 no.1~4 (2015)
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