We use a model of pure, intertemporal exchange with spatially and information-ally separated markets to explain the existence of private securities which circulate and, hence, play a prominent role in exchange. The model, which utilizes a perfect foresight equilibrium concept, implies that a Schelling-type coordination problem can arise. It can happen that the amounts of circulating securities that are required to support an equilibrium and that are issued at the same time in informationally separated markets must satisfy restrictions not implied by individual maximization and market clearing in each market separately.

The consequences of costly divisibility of assets are studied using a model with the following features. The demand for assets is generated from an overlapping generations model with a continuum of agents in each generation and with intra-generation trade (intermediation) ruled out. There is a once-for-all supply of a stock of nonnegative-dividend assets in a large size, and there is a costly technology for dividing them into smaller sizes. Stationary equilibria are shown to exist. In contrast with similar models with costless divisibility of assets, competitive equilibria are not necessarily desirable; there can be Pareto-ordered equilibria.

Previous authors have argued that the optimal monetary policy is contractionary. If buyers value consumption substantially more than sellers, there is some randomness and informational constraints make asset trading useful, we show that there is an incentive compatible expansionary policy that dominates all incentive compatible contractionary policies.

In the modern theory of growth, monopoly plays a crucial role both as a cause and an effect of innovation. Innovative firms, it is argued, would have insufficient incentive to innovate should the prospect of monopoly power not be present. This theme of monopoly runs throughout the theory of growth, international trade, and industrial organization. We argue that monopoly is neither needed for, nor a necessary consequence of, innovation. In particular, intellectual property is not necessary for, and may hurt more than help, innovation and growth. We argue that, as a practical matter, it is more likely to hurt.