In a general-equilibrium economy with nonconvexities, there are sunspot equilibria with good welfare properties; sunspots can ameliorate the effects of the nonconvexities. For these economies, we show that agents act as if they have quasi-linear utility functions. We use this result to construct...

We study the efficiency of liquidity provision by dealers and the desirability of policy intervention in over-the-counter (OTC) markets during crises. We emphasizes two OTC frictions: finding counterparties takes time, and trade is bilateral and involves bargaining. We model a crisis as a shock...

This paper adopts mechanism design to investigate the coexistence of fiat money and higher-return assets. We consider an economy with pairwise meetings where fiat money and risk-free capital compete as means of payment, as in [28]. The trading mechanism in pairwise meetings is chosen among all...

I apply mechanism design to quantify the cost of inflation that can be attributed to monetary frictions alone. In an environment with pairwise meetings, the money demand that is consistent with an optimal, incentive feasible allocation takes the form of a continuous correspondence that can fit...

We construct a model where capital competes with fiat money as a medium of exchange, and establish conditions on fundamentals under which fiat money can be both valued and socially beneficial. When the socially efficient stock of capital is too low to provide the liquidity agents need, they...

We study a market where innovators, who are good at coming up with ideas, can sell them to entrepreneurs, who might be better at implementing them. The market is decentralized, with random matching and bargaining. Ideas are characterized by five salient features: they are indivisible; partially...

This introduces the Symposium on Search Theory and Applications.

The framework in Lagos and Wright (2005) [20] combining decentralized and centralized markets is used extensively in monetary economics. Much is known about that model, but there is a loose end: only under special assumptions about bargaining power or decentralized market preferences has it been...

Green and Zhou relax the assumption, made in early search-based models of monetary exchange, of indivisible money. Their paper and various extensions make much technical progress, and derive some interesting substantive results. In particular, they show there is an indeterminacy of steady-state...