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Articles 1 - 9 of 9
Full-Text Articles in Social and Behavioral Sciences
Default Penalty As A Selection Mechanism Among Multiple Equilibria, Juergen Huber, Martin Shubik, Shyam Sunder
Default Penalty As A Selection Mechanism Among Multiple Equilibria, Juergen Huber, Martin Shubik, Shyam Sunder
Cowles Foundation Discussion Papers
The possibility of the presence of multiple equilibria in closed exchange and production-and-exchange economies is usually ignored in macroeconomic models even though they are important in real economies. We argue that default and bankruptcy laws serve to provide the conditions for uniqueness of an equilibrium. In this paper, we report experimental evidence on the effectiveness of this approach to resolving multiplicity: a society can assign default penalties on fiat money so that the economy selects one of the equilibria. The laboratory data show that the choice of default penalty takes the economy near the chosen equilibrium. The theory and evidence …
Default Penalty As A Selection Mechanism Among Multiple Equilibria, Juergen Huber, Martin Shubik, Shyam Sunder
Default Penalty As A Selection Mechanism Among Multiple Equilibria, Juergen Huber, Martin Shubik, Shyam Sunder
Cowles Foundation Discussion Papers
Closed exchange and production-and-exchange economies may have multiple equilibria, a fact that is usually ignored in macroeconomic models. Our basic argument is that default and bankruptcy laws are required to prevent strategic default, and these laws can also serve to provide the conditions for uniqueness. In this paper, we report experimental evidence on the effectiveness of this approach to resolving multiplicity: a society can assign default penalties on fiat money so that the economy selects one of the equilibria. Our data show that the choice of default penalty takes the economy close to the chosen equilibrium. The theory and evidence …
Default Penalty As A Disciplinary And Selection Mechanism In Presence Of Multiple Equilibria, Juergen Huber, Martin Shubik, Shyam Sunder
Default Penalty As A Disciplinary And Selection Mechanism In Presence Of Multiple Equilibria, Juergen Huber, Martin Shubik, Shyam Sunder
Cowles Foundation Discussion Papers
Closed exchange and production-and-exchange economies may have multiple equilibria, a fact that is usually ignored in macroeconomic models. Our basic argument is that default and bankruptcy laws are required to prevent strategic default, and these laws can also serve to provide the conditions for uniqueness. In this paper we report experimental evidence on the effectiveness of this approach to resolving multiplicity: society can assign default penalties on fiat money so the economy selects one of the equilibria. Our data show that the choice of default penalty takes the economy to the neighborhood of the chosen equilibrium. The theory and evidence …
The Value Of Fiat Money With An Outside Bank: An Experimental Game, Juergen Huber, Martin Shubik, Shyam Sunder
The Value Of Fiat Money With An Outside Bank: An Experimental Game, Juergen Huber, Martin Shubik, Shyam Sunder
Cowles Foundation Discussion Papers
Why people accept intrinsically worthless fiat money in exchange for real goods and services has been a longstanding question. There are many competing sufficient explanations that may confound each other in practice but can be individually tested in isolation experimentally. In this paper we examine a sufficient explanation of the value of fiat money through the existence of a debt instrument which allows consumption to be moved earlier in time. We present experimental evidence that the theoretical predictions about the behavior of such economies work reasonably well in a laboratory setting. The import of this finding for the theory of …
Sufficiency Of An Outside Bank And A Default Penalty To Support The Value Of Fiat Money: Experimental Evidence, Juergen Huber, Martin Shubik, Shyam Sunder
Sufficiency Of An Outside Bank And A Default Penalty To Support The Value Of Fiat Money: Experimental Evidence, Juergen Huber, Martin Shubik, Shyam Sunder
Cowles Foundation Discussion Papers
We present a model in which an outside bank and a default penalty support the value of fiat money, and experimental evidence that the theoretical predictions about the behavior of such economies, based on the Fisher-condition, work reasonably well in a laboratory setting. The import of this finding for the theory of money is to show that the presence of a societal bank and default laws provide sufficient structure to support the use of fiat money and use of the bank rate to influence inflation or deflation, although other institutions could provide alternatives.
Sufficiency Of An Outside Bank And A Default Penalty To Support The Value Of Fiat Money: Experimental Evidence, Juergen Huber, Martin Shubik, Shyam Sunder
Sufficiency Of An Outside Bank And A Default Penalty To Support The Value Of Fiat Money: Experimental Evidence, Juergen Huber, Martin Shubik, Shyam Sunder
Cowles Foundation Discussion Papers
We present a model in which an outside bank and a default penalty support the value of fiat money, and experimental evidence that the theoretical predictions about the behavior of such economies, based on the Fisher-condition, work reasonably well in a laboratory setting. The import of this finding for the theory of money is to show that the presence of a societal bank and default laws provide sufficient structure to support the use of fiat money and use of the bank rate to influence inflation or deflation, although other institutions could provide alternatives.
Money And The Monetization Of Credit, Martin Shubik
Money And The Monetization Of Credit, Martin Shubik
Cowles Foundation Discussion Papers
The relationship between money and credit is discussed in terms of network linkage. Fiat money is the only instrument with the universal recognition of its issuer. Near monies such as bank money and money substitutes such as gasoline credit cards can be classified in terms of their network links. This leads to a way of considering the velocity of money.
Fiat Money And The Efficient Financing Of The Float, Production And Consumption. Part I: The Float, Martin Shubik
Fiat Money And The Efficient Financing Of The Float, Production And Consumption. Part I: The Float, Martin Shubik
Cowles Foundation Discussion Papers
The basic distinction in the optimization conditions between the general equilibrium model of a T period exchange economy and a strategic market game process model is between a set of equations homogeneous of order zero and a set of nonhomogeneous equations. The latter have an amount M of outside or fiat money added to the system. If there is an outside bank willing to lend or accept deposits at an interest rate rho > 0 at the end of time T the initial amount of money M will have been consumed in interest payments to the outside bank. The price level …
Strategic Market Games: A Dynamic Programming Application To Money, Banking And Insurance, Martin Shubik
Strategic Market Games: A Dynamic Programming Application To Money, Banking And Insurance, Martin Shubik
Cowles Foundation Discussion Papers
A series of models (kept simple in order to stress the structure of the models and the nature of the questions) are described and problems are posed pertaining to a dynamic economy with various possibilities for the issuance of fiat money, credit and insurance.