On Money as a Medium of Exchange¶
Kiyotaki, N., & Wright, R. (1989). On Money as a Medium of Exchange. Journal of Political Economy, 97(4), 927-954.
Cited by¶
1 citation across 1 artifact.
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Primes¶
- Common-Medium Intermediation
- Introducing it performs the N-by-N to N-by-1 collapse: each trader now needs only the one relationship "I accept money," and any trader can transact with any other through it, so the count of adaptations the system must sustain falls from quadratic to linear, N. The adoption threshold and network effect are explicit: money is worth accepting precisely to the degree that others accept it, so below a critical mass the medium is fragile, and above it each new adopter raises the medium's value to all existing holders, locking the equilibrium.
This sourceSearch-theoretic model in which a commodity becomes money because everyone accepts it, exhibiting the adoption threshold and self-reinforcing network effect.
- Introducing it performs the N-by-N to N-by-1 collapse: each trader now needs only the one relationship "I accept money," and any trader can transact with any other through it, so the count of adaptations the system must sustain falls from quadratic to linear, N. The adoption threshold and network effect are explicit: money is worth accepting precisely to the degree that others accept it, so below a critical mass the medium is fragile, and above it each new adopter raises the medium's value to all existing holders, locking the equilibrium.
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