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In decentralized trade individuals self-insure against consumption risk via costly diversification of skills. Although money acts as a consumption insurance, it may lead to a moral hazard problem. If the problem is severe, monetizing trade can lower welfare relative to barter
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In the homogenous good case, the relationship between market structure and efficiency was studied extensively. Assuming … context. It can be shown that there is a positive relationship between market heterogeneity and efficiency, too. In contrast …
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