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Barley, Gold, or FiatToward a Pure Theory of Money$
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Thomas Quint and Martin Shubik

Print publication date: 2014

Print ISBN-13: 9780300188158

Published to Yale Scholarship Online: May 2014

DOI: 10.12987/yale/9780300188158.001.0001

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Trade with a Rich Large Agent

Trade with a Rich Large Agent

(p.40) Chapter 5 Trade with a Rich Large Agent
Barley, Gold, or Fiat

Thomas Quint

Martin Shubik

Yale University Press

Now we introduce large atomic players into the Basic Model. In the first model we introduce a single consumer (of goods 1 and 2), endowed with a lot of money, whose bids are large enough to singlehandedly change prices. In another model, we replace this consumer with a similarly endowed moneylender (bank), who only uses her money to lend to the other agents and whose sole objective is to maximize monetary profit. A third model replaces the moneylender with an agent who is a combination of the large agents from the first two models, that is, an entity that both consumes goods and lends money for profit. Finally in a fourth model we replace this with an altruistic bank (central bank), that is, an agent endowed with a lot of money who lends it to the traders at an interest rate of zero. We compare and contrast the results from all of these models.

Keywords:   altruistic bank, moneylender, monopolistic moneylender, perfect equilibrium, rich large buyer model

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