Journal of Economics

, Volume 55, Issue 2, pp 123–150 | Cite as

A strategic market game with a mutual bank with fractional reserves and redemption in gold

A continuum of traders
  • M. Shubik
  • D. P. Tsomocos


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.


Gold Interest Rate Economic Theory Rate Formation International Economic 
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Copyright information

© Springer-Verlag 1992

Authors and Affiliations

  • M. Shubik
    • 1
  • D. P. Tsomocos
    • 1
  1. 1.Cowles Foundation for Research in EconomicsYale UniversityNew HavenUSA

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