We consider an environment where trade is decentralized and agents only obtain informationabout the state of the economy (the amount of money in circulation) through their personalexperiences in the market. We describe the individual agent decision as a two-armed banditproblem and characterize the dynamics of the market under different regimes. We study howthe bank’s (the agent ...

Over the past fifty years the size of computer applications, as gauged by any reasonable measure, has increased exponentially. In contrast, our cognitive capabilities for understanding have not changed. This discrepancy has forced us to look for more abstract representations of systems to reduce the number of elements we have to consider simultaneously in order to understand the system behavior...

The present work introduces the first decentralized secure funds transfer protocol with multiple participants. The protocol guarantees that a participant only loses money if a trusted peer happens to be corrupt. Furthermore, the loss is limited to the amount of credit given to that partner. The protocol supports expiration times for payment orders, and takes into consideration actual network qu...

The mechanism by which aggregate supply creates the income that generates its matching demand (called Say’s Law), may not work in a general equilibrium with decentralized markets and savings in bonds or money. Full employment is an equilibrium, but convergence to that state is slow. A self-fulfilling precautionary motive to accumulate bonds (with a zero aggregate supply) can set the economy on ...

A dynamic spatial model is constructed where there is a role for money and for centralized payments arrangements, and where there are aggregate fluctuations driven by fluctuations in aggregate productivity. With decentralized monetary exchange and no centralized payments arrangements, there is price level indeterminacy, and the equilibrium allocation is inefficient. A private clearinghouse arra...

In 1965-70 the government agency, Statskontoret, set up five university computing centers, as service bureaux financed by grants earmarked for computer use. The centers were well equipped and staffed and caused a surge in computer use. When the yearly flow of grant money stagnated at 25 million Swedish crowns, the centers had to find external income to survive and acquire time-sharing. But the ...

A cryptocurrency is a digital currency backed by mathematics and cryptography, compared to traditional fiat money which was traditionally backed by gold or silver. The foundation of many cryptocurrencies is based on a key derivation scheme known as scrypt [3]. Cryptocurrencies, such as Bitcoin [2], provide a means of having a decentralized, distributed, peer-to-peer electronic cash system. Thes...

We consider a model of decentralized exchange where individuals choose the set of goods they produce. Specialization involves producing a smaller set of goods and doing it more proÞciently. In doing so, agents reduce production costs, but also reduce the ease of trading their output. We derive the equilibrium degree of specialization and examine how it is affected by underlying fundamentals. Du...

We study decentralized trade processes in general exchange economies and house allocation problems with and without money. The processes are a¤ected by persistent random shocks stemming from agents’maximization of random utility. By imposing structure on the utility noise term –logit distribution–, one is able to calculate exactly the stationary distribution of the perturbed Markov process for ...

As recent events attest, modern economies may have trouble enforcing Say’s Law. An economy with decentralized markets and trades between goods and a liquid asset, money, has two equilibria. In full-employment, output is determined by supply. But a higher demand for liquidity is self-fulfilling and precipitates the economy to an equilibrium where output is determined by demand: the increase of t...