Government transaction policy, media of exchange, and prices

We study government transaction policies in search-theoretic models of money. We model government as a subset of agents, who are subject to the same random matching technology and other constraints as private agents, but who behave in an exogenous way regarding which objects they accept in trade and at what price. The objective is to see how these policies affect private agents' strategics, and hence the set of equilibria. We analyze how the effects depend on factors like the size of government, the intrinsic properties of money, and the availability and efficacy of substitutes like barter or foreign currency. (C) 1998 Academic Press.