There is a fixed number N of people, a fixed number n of different durable goods, and the
same number n of different types of labor. Labor of type i can be used only to produce
good i. Time is discrete, indexed by "weeks" t = 1; :::; T. There are 48 weeks per "year." In
addition to the n goods, there are two nominal assets: fiat money and bonds. A bond is a
promise by the government to pay one unit of money ("dollar") next week.
Each person has a fixed type (i; j), where i 6= j and i 6= j + 1 (mod n), meaning that
each week he is endowed with one unit of labor of type i (his "production good") and can eat
only goods j and j + 1 (mod n) (his primary and secondary "consumption goods"). There
is exactly one person of each type. Thus, the population of the economy is N = n (n - 2).
In everything that follows, we set the number of goods n equal to 50, implying a population
of N = 2400 people.
Because no person can eat his own production good, everyone must trade to consume.
Trading can take place only through facilities called "shops." Each shop is a combined
production/trading operation. There are n different types of shops. A shop of type i is