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We develop an anonymous trading framework where specialization and trade are beneficial to society and trading arrangements are endogenous. Its key features are that individual actions can have long-lasting aggregate consequences and the current allocation of consumption can affect the future availability of productive resources. We study equilibrium patterns of exchange when the trading sequences are finite and deterministic, demonstrating that fiat money does not necessarily loose its beneficial allocative role. The reason is that individual actions that reduce the agent’s current payoff–such as selling for money on its final trading date–can be incentive-compatible when this prevents others from making choices carrying adverse long-lasting aggregate consequences.


monetary equilibrium, anonymous trade, finite horizons, repeated games, specialization

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