Shuntian Yao Publications

We propose a game-theoretic model to study various effects of scale in an insurance market. After reviewing a simple static model, we present a one-period game in which both the buyers and sellers of insurance make strategic bids, and show that, under reasonably broad conditions, market equilibrium exists. For a special case, we then consider how both the price and quantity of insurance, as well as other quantities of interest to public policy decision makers, are affected by the number of insurance firms, the number of customers, and the total amount of capital provided by investors.

We consider the relationship between the length of life of individuals and the assets they own and their influence on trustless trade. In particular in some structures a role for government or an outside bank may be called for to support an equilibrium. An example of an OLG model with production illustrates the need for expanding the fiat money supply if population growth is greater than zero.

The role of long lived assets is considered in serving as hostages to extend the domain of trustless trade in an exchange economy. Assuming that individuals have life cycle preferences, we consider the most general set of utility functions consistent with these preferences and a stationary equilibrium for an OLG economy. The influence of the type of asset, durable or storable on the need for money is considered.

Several models of exchange are presented here to illustrate various conceptual problems in the microeconomic model of the velocity of money and the meaning of and cost of liquidity in an exchange economy without exogenous uncertainty.

In a previous paper (Shubik and Yao, 1988) we examined a multistage exchange economy with m perishable goods and one infinitely durable gold used as money. we considered an economy without credit and one with one hundred percent secured loans. In this paper we consider an economy with m(1) goods which have finite lives and m(2) goods which are of infinite durability. Historically the two durables which have been prominent in economic activity have been gold and land, although one might wish to include platinum and some other items.

JEL Classification: 021, 022, 213

Keywords: Exchange economy, gold, strategic games, durables

The payments system of a modern economy is a peculiar mix of technological and institutional factors. Trade takes time and involves some form of money or credit. Going to the bank or arranging credits is expensive. Baumol (1952) and Tobin (1956) address the costs of transactions. However both the Baumol and the Tobin analysis was carried out in a partial equilibrium context. Here we address the task of considering the costs of banking in a closed strategic market game.

JEL Classification: 021, 022, 213

Keywords: Strategic game, exchange economy, transaction costs

A multiperiod exchange economy with gold used both as money and as jewelry is examined in this paper. The existence of Nash equilibria is proved for the market games with finitely many traders as well as the games with a continuum of traders. For market games with a continuum of traders at infinite horizon, the existence of stationary Nash equilibria has been proved under the assumption that gold is properly distributed at the beginning or a secured loan between traders is available.

JEL Classification: 021, 026, 311

Keywords: Gold, Exchange economy, Nash equilibrium, Trading