Not logged in.
Quick Search - Contribution
Contribution Details
| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Money Illusion and Coordination Failure |
| Organization Unit | |
| Authors |
|
| Language |
|
| Institution | University of Zurich |
| Series Name | Working paper series / Institute for Empirical Research in Economics |
| Number | No. 177 |
| ISSN | 1424-0459 |
| Date | 2004 |
| Abstract Text | "Economists long considered money illusion to be largelynirrelevant. Here we show, however, that money illusion has powerfulneffects on equilibrium selection. If we represent payoffs in nominal terms,nchoices converge to the Pareto inefficient equilibrium; however, if we liftnthe veil of money by representing payoffs in real terms, the Pareto efficientnequilibrium is selected. We also show that strategic uncertainty about thenother players’ behavior is key for the equilibrium selection effects ofnmoney illusion: even though money illusi on vanishes over time if subjectsnare given learning opportunities in the context of an individual optimizationnproblem, powerful and persistent effects of money illusion are found whennstrategic uncertainty prevails." |
| Official URL | http://www.econ.uzh.ch/wp.html |
| PDF File |
Download from ZORA
|
| Export |
BibTeX
EP3 XML (ZORA)
|