Construction of Demand for Money in Strategic Market Games

In this paper SMG with two players and outside bank is studied. There are two markets of consumable goods and credit market. The rules of credit market determine punishment for player’s default. Markets interaction and absence of punishment for default determine general equilibrium in the SMG based on individual rational behavior of each player. This issue of macroeconomic theory is one of the most interesting and unstudied for today nevertheless presentence of multiple papers on this theme. In this work it is found out that there is a solution of this particular case of SMG in mixed strategies. In order to determine this solution ill-posed problem of solving integral Fredholm equation of 1-st kind was numerically solved with methods of matrix approximation with Tchebyshev polynomials of first type and A. Thihonov regularization. Finally co-distribution of mixed strategies for each player was numerically simulated. And based on individually rational demand for money probability distribution of interest rate is calculated. Analyze of this distribution shows that changes in the strategy of the player with other constant indicators of the model leads to a change in the interest rate. This effect shows inconstancy of interest rate in response to rational usage of mixed strategies by each player. This result require further more deep researching in order to understand interaction between real and financial economy sectors. Supervisor: Dmitry Levando