A Strategic Market Game with a Mutual Bank with Fractional Reserves and Redemption in Gold

Shubik, Martin and Tsomocos, Dimitrios (1992) A Strategic Market Game with a Mutual Bank with Fractional Reserves and Redemption in Gold. Journal of Economics, 55 (2). pp. 123-150.

Abstract

We utilize the strategic market game approach to analyze the role and function of a mutual bank with variable fractional reserves, redemption in gold, and endogenous interest rate formation. We specify the conditions of enough money and its distribution. Using the continuum of traders model, we show existence and optimality for the case ofno bankruptcy as well as for the case in which there exists the potentiality of bankruptcy. Finally, we analyze the relationship of the gearing ratio and the bankruptcy penalty with respect to the resulting equilibrium allocations.

Item Type: Article
Keywords: Gold reserves; Interest rates; Banking industry; Money; Game theory; Economics; finance
Subject(s): Finance
Date Deposited: 25 Jan 2012 20:11
Last Modified: 02 Mar 2017 14:24
Funders: N/A
URI: http://eureka.sbs.ox.ac.uk/id/eprint/1869

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