Search, evolution, and money

Abstract

This paper describes a search-theoretic model that can be used to determine which objects serve as media of exchange, or money. Existing versions of the model are generalized to allow arbitrary distributions of agents who specialize in different consumption-production activities. I characterize the way the numbers of consumers and producers of the various goods help determine which goods serve as money. The distribution is then endogenized, so that agents can choose their type. This generates a unique equilibrium outcome. Ideas from evolutionary dynamics are employed as a way to interpret the model, and to compute equilibria.

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