Trade Using One Commodity as a Means of Payment

A general model of noncooperative trading equilibrium is described in which prices depend in a natural way on the buying and selling decisions of the traders, avoiding the classical assumption that individuals must regard prices as fixed. The key to the approach is the use of a single, specified commodity as "cash," which may or may not have intrinsic value. The model, in several variants, is treated as a noncooperative game, in the spirit of Nash and Cournot. The rules of the game, including the price-forming mechanism, are independent of behavioral or equilibrium assumptions, which enter, instead, through the solutions of the game.

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