I examine the robustness of monetary equilibria in a random matching model where a more efficient mechanism for trade is available. Agents choose between two trading sectors: the search and the intermediated sector. In the former, trade partners arrive randomly and there is a trading...

I study a search-theoretic model with pairwise meetings where dealers arise endogenously. The extent of intermediation depends on its cost, trade frictions, and the dealers' ability to negotiate favorable terms of trade. Under Nash bargaining, there is a unique equilibrium where dealers buy and...

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

We relax restrictions on the storage technology in a prototypical monetary search model to study price dispersion. When multiple units of currency can be stored, buyers and sellers enter matches with potentially different willingness to buy or sell. Across the distribution of possible bilateral...

In many situations, some people hold large money balances but have no particular urgency to spend them while others are liquidity constrained. This problem creates a role for financial intermediaries who accept nominal deposits and make nominal loans. We show that financial intermediation...

We present a thought-provoking study of two monetary models: the cash-in-advance and the Lagos and Wright (2005) models. We report that the different approach to modeling money - reduced-form vs. explicit role - neither induces theoretical nor quantitative differences in results. Given...

Monetary theorists have advanced an intriguing notion: we exchange money to make up for a lack of enforcement, when it is difficult to monitor and sanction opportunistic behaviors. We demonstrate that, in fact, monetary equilibrium cannot generally be sustained when monitoring and punishment...

We study the behavioral underpinnings of adopting cash versus electronic payments in retail transactions. A novel theoretical and experimental framework is developed to primarily assess the impact of sellers' service fees and buyers' rewards from using electronic payments. Buyers and sellers...

We construct a tractable ‘fundamental’ model of money with equilibrium heterogeneity in money balances and prices. We do so by considering randomized monetary trades in a standard search-theoretic model of money where agents can hold multiple units of indivisible ‘tokens’ and can offer...