Hitotsubashi Institute for Advanced Study


Market Structure and Indeterminacy of Stationary Equilibria in a Decentralized Monetary Economy


This study investigates which market structure gives rise to indeterminacy of stationary equilibria in a decentralized economy with non-degenerate distributions of money holdings. I develop a price-posting model with divisible money and then, examine two alternative markets: a pairwise random matching market and many-to-many exchange. Importantly, the former market balances the number of matched buyers and sellers by definition. As a result, indeterminacy arises under the pairwise matching while a unique equilibrium exists in the many-to-many market. This balancing assumption also leads to the indeterminacy in a Walrasian market.

Report No.: HIAS-E-84
Author(s): So Kubota
Affiliation: Hitotsubashi Institute for Advanced Study, Hitotsubashi University
Issued Date: March 2019
Keywords: search theory, money, indeterminacy
JEL: D31, D51, D83, E41