DEPARTMENT OF ECONOMICS
YALE UNIVERSITY
P.O. Box 208268
New Haven, CT 06520-8268
http://www.econ.yale.edu/
Economics Department Working Paper No. 26
Cowles Foundation Discussion Paper No. 1622
Everyone-a-Banker or the Ideal Credit Acceptance
Game: Theory and Evidence
Juergen Huber, Martin Shubik, and Shyam Sunder
August 2007
This paper can be downloaded without charge from the
Social Science Research Network Electronic Paper Collection:
http://ssrn.com/abstract=1009531
Everyone-a-banker or the Ideal Credit Acceptance Game:
Theory and Evidence1
Juergen Huber, University of Innsbruck
Martin Shubik, Yale University, and
Shyam Sunder, Yale University
Abstract
Is personal credit issued by participants sufficient to operate an economy efficiently, with
no outside or government money? Sorin (1995) constructed a strategic market game to
prove that this is possible. We conduct an experimental game in which each agent issues
her own 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, or
need for trust, the economy operates efficiently at any price level without government
money. Conversely, perhaps explanations for prevalence of government money should be
sought in either the above mentioned frictions or our unwillingness to experiment with
innovation.
Keywords: government and individual money, efficiency, experimental gaming
JEL C73, C91
Draft August 21, 2007
1 We are thankful to Benjamin Felt and Ryan Dunn for their laboratory assistance.
2
1. INTRODUCTION
For many years there has been a debate as to whether both outside and inside (i.e.,
government and private) money are needed to run an economy. Do we need a system
where almost all of the means of payment are d