Emergence of a Good as a Medium of Exchange in Different Types of Networks

This study uses a novel agent-based computer model to examine how networks influence the emergence of multiple goods as media of exchange in a decentralized economy. This model implements the evolutionary process of the Kiyotaki-Wright (KW) model (1989), which explains the endogenous emergence of multiple media of exchange. I find that all the agents behave according to the KW model, where some agents prefer to accept a higher storage cost good over a lower storage cost good because they speculate having a shorter wait for trading their consumption goods. In the study, the KW model is expanded to different types of trade networks and shows that trade networks can cause agents to adopt speculative strategies. Ultimately, the results highlight the emergence of multiple goods as media of exchange is a function of networks