The Basic Environment
The Basic Environment
This chapter first explores the basic environment for society’s need for a media of exchange. It defines the standard Arrow–Debreu model economy and suggests that such a study of media exchange requires a departure from this model, which implies that the economy can achieve a Pareto-efficient allocation without needing factors like money or other financial institutions. The chapter then outlines the ingredients needed in developing a good model of media of exchange. Finally, it lays out the characteristics of the benchmark model that will be used throughout the book.
Keywords: media of exchange, Arrow–Debreu model economy, Pareto-efficient allocation, day market, night market, competitive market
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