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A model that includes the cost of producing money is presented and the nature of the ineﬀicient equilibria in the model are examined. It is suggested that if one acknowledges that transactions are a form of production, which requires the consumption resources, then the concept of Pareto optimality is inappropriate for assessing eﬀiciency. Instead it becomes necessary to provide an appropriate comparative analysis of alternative transactions mechanisms in the appropriate context.
Shubik, Martin and Tsomocos, Dimitrios P., "A Strategic Market Game with Seigniorage Costs of Fiat Money" (1993). Cowles Foundation Discussion Papers. 1286.