Monitoring and coordination for essentiality of money
-
Yu Awaya
and
Hiroki Fukai
Abstract
For money to be essential, environments have been considered in which there is imperfect monitoring of past actions and in which it is difficult to coordinate among economic agents. This paper provides an environment in which there is no monitoring of past actions while coordination is difficult. In this environment, we show that the first best allocation is achieved without money, and hence, money is not essential. The implication is that, for money to be essential, no monitoring is not enough but coordination must also be free.
Funding source: NSF
Award Identifier / Grant number: SES-1626783
Funding source: JSPS
Award Identifier / Grant number: 19K13648
Funding statement: Awaya acknowledges financial support from NSF http://dx.doi.org/10.13039/100000001, Grant (SES-1626783). Fukai acknowledges financial support from JSPS KAKENHI (Grant Number 19K13648).
Acknowledgement
We would like to thank Neil Wallace for his guidance and continuous support and Luis de Araujo for his helpful suggestions and encouragement.
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