Fiat money is a type of paper or symbol with which any individual may buy most things by law. It has virtually no intrinsic value but immediately assumes a trading value when its shortage can prevent trades that would have been deemed proﬁtable in a nonmonetary competitive equilibrium system. This paper sketches an approach to a theory of ﬁat money by investigating the properties of a noncooperative dynamic trading games embedded within a closed economic system. Among the conclusions are that inflation and deflation are not symmetric, and that it is not possible to deﬁne a noncooperative game involving borrowing without specifying “rules of borrowing” or a bankruptcy law.
Shubik, Martin, "A Theory of Money and Financial Institutions. Part IV. Fiat Money and Noncooperative Equilibrium in a Closed Economy" (1972). Cowles Foundation Discussion Papers. 563.