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Intrinsically Worthless Objects as Media of Exchange: Experimental Evidence*
Author(s) -
Duffy John,
Ochs Jack
Publication year - 2002
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/1468-2354.t01-1-00030
Subject(s) - security token , object (grammar) , medium of exchange , wright , token economy , nash equilibrium , computer science , microeconomics , economics , commerce , monetary economics , computer security , psychology , artificial intelligence , social psychology , currency , reinforcement , programming language
This article reports results from an experiment that examines whether an intrinsically worthless, ‘‘token'’ object serves as a medium of exchange in a laboratory implementation of Kiyotaki and Wright's search model of money. The theory admits Nash equilibria in which the token object is or is not used as a medium of exchange. We find that subjects nearly always offer to trade for the token object when such a trade lowers their storage costs. However, subjects frequently refuse to offer to trade the token object for more costly‐to‐store goods when the theory predicts they should make such trades.