Assume market with many individuals who trade goods

Assignment Help Business Economics

Reference no: EM13898742

Assume a market with many individuals who trade goods. The number of goods available for trade grows as time evolves. In the first period, there is only one good to trade, in the second period, two goods, and so on (obviously in the Nth period there are N goods). Suppose that the market arrangement (and preferences of individuals) is such that the probability an individual engages in trading is inversely proportional to the number of goods: if there is only one good, the probability of trading is 1; if there are N goods, the probability of trading is 1/N. The payoff if an individual trades is 1 and if she does not, the payoff is zero. Suppose that individuals can create a monetary system every period for which they all have to pay a cost equal to 0 < x < 1. This system, however, raises the probability of trading for all individuals to 1 irrespective of the number of goods available in the market. After how many periods will individuals in this market decide to pay for this monetary system? Note that individuals decide whether to pay for the monetary system before they look for trades. (Hint: what is the expected payoff for a given individual if there is no money? How about if there is money? At which point are these equal?).

Reference no: EM13898742

Questions Cloud

Element of uk film relate to cultural characteristics : How does this element of UK film relate to the cultural characteristics or values/beliefs held by the nation as well as the ways in which it may help illustrate the tension between cultural "difference" and "universal" experiences or emotions?

Notion of circumstances and choices : 1) Why does the UK seem to be drawn to crime thrillers more than any other genre and how do such films hold special relevance to the nation? 2) Why does the notion of circumstances and choices available to characters hold a special interest for UK ..

How sec has influence over the audit of smackey dog foods : Discuss how the SEC has influence over the audit of Smackey Dog Foods, Inc and discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the Smackey Dog Food client?

What is his quantity supplied : One thousand Patients called up Dr. Kalikorn and asked him to perform a new surgical procedure. Dr. Kalikorn booked all 1,000 and told them that he could perform twice as many procedures, if only he had more patients. What is his quantity supplied?

Assume market with many individuals who trade goods : Assume a market with many individuals who trade goods. The number of goods available for trade grows as time evolves. In the first period, there is only one good to trade, in the second period, two goods, and so on (obviously in the Nth period there ..

Which employee benefit do you personally value the most : Which employee benefit do you personally value the most? Why is it important for organizations to offer benefits to their employees? How do benefits positively or negatively affect an organization

Assume the required reserves ratio : Assume the required reserves ratio is .15,

The change in equilibrium quantity : The change in equilibrium quantity will be:

Two alternative activities to help relieve her backache : Mrs. Siegal has two alternative activities to help relieve her backache. In the first, she can visit a physiotherapist. The total time for a physiotherapist visit, including travel and waiting, is two hours. Mrs. Siegal earns a wage of $20 an hour. ..

User Account

All Pages