No . 16 - 1 Credit , Money and Asset Equilibria with Indivisible Goods

In a New Monetarist framework, we study the trade of indivisible goods under credit, divisible money and divisible asset in a frictional market. We show how indivisibility on the goods side, instead of the money or asset side, matters for equilibria. The bargaining solution generates a price that is independent of nominal interest rate, dividend value of the asset, or the number of active buyers carrying the asset for liquidity purposes. To reestablish this link, we consider price posting with competitive search. We derive conditions under which stationary equilibrium exists. With asset and bargaining, we find that for negative dividend value on the asset, multiple equilibria occur. Otherwise, in all possible combinations of liquidity and price mechanisms, including positive dividend value under asset, the equilibrium is unique or generically unique. JEL: D51, E40.