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The Great Capitol Hill Baby Sitting Co‐op: Anecdote or Evidence for the Optimum Quantity of Money?
Author(s) -
HENS THORSTEN,
REINER SCHENKHOPPÉ KLAUS,
VOGT BODO
Publication year - 2007
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2007.00068.x
Subject(s) - rationality , clearance , economics , anecdote , rationing , rational expectations , monetary economics , perspective (graphical) , fiat money , money market , financial market , microeconomics , mathematical economics , econometrics , monetary policy , mathematics , finance , philosophy , medicine , health care , geometry , epistemology , political science , law , urology , economic growth
This paper studies a centralized market with idiosyncratic uncertainty and money as a medium of exchange from a theoretical as well as an experimental perspective. In our model, prices are fixed and markets are cleared by rationing. We prove the existence of stationary monetary equilibria and of an optimum quantity of money. The rational solution of our model, which is based on the assumption of individual rationality and rational expectations, is compared with actual behavior in a laboratory experiment. The theoretical results are strongly supported by this experiment.