Cash motivated subjects trade goods (redeemable in U.S. currency) for tickets (a fiat experimental money) in two double auction markets. Each subject is a buyer in one market and a seller in the other. Tickets act as the only medium of exchange bringing buyers and sellers together both within, and between, markets. Two treatments are considered. In treatment one, we vary the length of the ticket money regime (short vs. long). In treatment two, we include or exclude government players who can print tickets in order to consume goods in both markets (gov vs. no-gov). We compare our treatments to a backed ticket money baseline in order to ask how our various treatments destabilize the monetary regime in terms of both nominal price effects and real efficiency effects. We find that in the no-gov condition subjects were better able to sustain trading than in the gov condition even though money was known to last over a fixed horizon. We are currently studying the degree to which it is the growth in money, or rational expectations toward the unchecked behavior of government that is responsible for the destabilization of the monetary regimes in the gov treatments.

Co-authors Cary Deck and Dave Porter