NONCOOPERATIVE GENERAL EXCHANGE WITH A CONTINUUM OF TRADERS - 2 MODELS

Price formation and trade in a large exchange economy is modelled as a non-atomic strategic game in two contrasting forms. (1) The 'pay-late r' form uses paper money or IOUs which the players must redeem at the final accounting or face overdraft penalties. (2) The 'cash-in-advance ' form uses a valuable commodity as money with no need for a central c learing house. Several results connecting strategic equilibrium (Courn ot-Nash) and competitive equilibrium (Walras) are obtained for (1) and (2). In the final section, a basic problem of measurability when stra tegies are selected independently by a continuum of agents is raised, and a way of resolving it is proposed.