Fiat money is a type of paper or symbol with which any individual may buy most things by law. It has virtually no intrinsic value but immediately assumes a trading value when its shortage can prevent trades that would have been deemed profitable in a nonmonetary competitive equilibrium system.
This paper sketches an approach to a theory of fiat money by investigating the properties of a noncooperative dynamic trading games embedded within a closed economic system.
Among the conclusions are that inflation and deflation are not symmetric, and that it is not possible to define a noncooperative game involving borrowing without specifying “rules of borrowing” or a bankruptcy law.
Fiat money is a type of paper or symbol with which any individual may buy most things by law. It has virtually no intrinsic value but immediately assumes a trading value when its shortage can prevent trades that would have been deemed profitable in a nonmonetary competitive equilibrium system.
This paper sketches an approach to a theory of fiat money by investigating the properties of a noncooperative dynamic trading games embedded within a closed economic system.
Among the conclusions are that inflation and deflation are not symmetric, and that it is not possible to define a noncooperative game involving borrowing without specifying “rules of borrowing” or a bankruptcy law.
It is suggested that an extra degree of freedom is needed to construct a symmetric noncooperative price game in a market with n monopolists trading in n goods. This calls for the introduction of an n+1 good which can be interpreted as a commodity money.
Where there are n monopolists using a commodity money in common a symmetric price or quantity noncooperative game can be constructed. The quantity game is examined. Necessary conditions are shown for the replicated game to have its noncooperative equilibria approach the competitive equilibria of the replicated market. It is demonstrated that unless there is “enough” commodity money convergence may not take place. There will be a “money shortage” and this will be reflected in a price for the commodity money higher than its utilitarian worth. This reflects the addition of a “shadow price” for the worth of relaxing the monetary capacity constraint.
It is suggested that an extra degree of freedom is needed to construct a symmetric noncooperative price game in a market with n monopolists trading in n goods. This calls for the introduction of an n+1 good which can be interpreted as a commodity money.
Where there are n monopolists using a commodity money in common a symmetric price or quantity noncooperative game can be constructed. The quantity game is examined. Necessary conditions are shown for the replicated game to have its noncooperative equilibria approach the competitive equilibria of the replicated market. It is demonstrated that unless there is “enough” commodity money convergence may not take place. There will be a “money shortage” and this will be reflected in a price for the commodity money higher than its utilitarian worth. This reflects the addition of a “shadow price” for the worth of relaxing the monetary capacity constraint.
Gaming and simulation mean different things to different people. Currently there exist separate schools of individuals working on interrelated but basically different areas. Each have their own special goals and terminology. Yet there is a sufficient overlap among them that it is important to clarify the common and different interests and terminology.
The general topic of gaming is ripe for an examination to see to what extent there exists a basic methodology and theory of gaming. This paper addresses itself, in part to this problem. Different types of games and different purposes are discussed. It is stressed that there is not one validation problem but many validation and specification problems which must be addressed if professional standards are to be attained.
Gaming and simulation mean different things to different people. Currently there exist separate schools of individuals working on interrelated but basically different areas. Each have their own special goals and terminology. Yet there is a sufficient overlap among them that it is important to clarify the common and different interests and terminology.
The general topic of gaming is ripe for an examination to see to what extent there exists a basic methodology and theory of gaming. This paper addresses itself, in part to this problem. Different types of games and different purposes are discussed. It is stressed that there is not one validation problem but many validation and specification problems which must be addressed if professional standards are to be attained.