Annals of Finance

, Volume 6, Issue 4, pp 475–509 | Cite as

An economy with personal currency: theory and experimental evidence

  • Martin Angerer
  • Juergen HuberEmail author
  • Martin Shubik
  • Shyam Sunder
Research Article


Is personal currency issued by participants sufficient to operate an economy efficiently, with no outside or government money? Sahi and Yao (in J Math Econ, 1989) and Sorin (in J Econ Theory, 1996) constructed a strategic market game to prove that this is possible. We conduct an experimental game in which each agent issues his/her personal IOUs, and a costless efficient clearinghouse adjusts the exchange rates among them so the markets always clear. The results suggest that if the information system and clearing are so good as to preclude moral hazard, any form of information asymmetry, and need for trust, the economy operates efficiently at any price level without government money. These conditions cannot reasonably be expected to hold in natural settings. In a second set of treatments when agents have the option of not delivering on their promises, a high enough penalty for non-delivery is necessary to ensure an efficient market; a lower penalty leads to inefficient, even collapsing, markets due to moral hazard.


Strategic market games Government and individual money Efficiency Experimental gaming 

JEL Classification

C73 C91 


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Copyright information

© Springer-Verlag 2010

Authors and Affiliations

  • Martin Angerer
    • 1
  • Juergen Huber
    • 1
    Email author
  • Martin Shubik
    • 2
  • Shyam Sunder
    • 2
  1. 1.University of InnsbruckInnsbruckAustria
  2. 2.Yale UniversityNew HavenUSA

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