Price Dispersion in a Simple Monetary Matching Model: A Numerical Approach

This paper studies a simple random matching model of money in which agents\u27 preferences depend not only on how much to consume but also on what to consume. It is shown that there is a continuum of prices each of which is determined by bilateral bargaining. A numerical method is used to compute market equilibrium of the model. As the quantity of money increases the market volatility decreases as well as the purchasing power of money