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Indivisible Goods and Fiat Money

Author

Listed:
  • Jorge Rivera
  • Michael Florig
Abstract
In spite of fiat money is useless in a standard Arrow-Debreu model, in this paper we will show that this does not hold true anymore when goods are indivisible. In our setting, although fiat money yields no utility, its price will always be positive and the set of equilibrium allocations changes with the distribution of fiat money. Its role lies in the fact that it could be used to facilitate exchange. Since a Walras equilibrium does not always exist when goods are indivisible, a new equilibrium concept - called rationing equilibrium - is introduced and its existence is proven under weak assumptions on the economy. A Walras equilibrium exists generically on the distribution of fiat money

Suggested Citation

  • Jorge Rivera & Michael Florig, 2004. "Indivisible Goods and Fiat Money," Econometric Society 2004 Latin American Meetings 167, Econometric Society.
    • Handle: RePEc:ecm:latm04:167
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    References listed on IDEAS

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    More about this item

    Keywords

    competitive equilibrium; indivisible goods; fiat money.;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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