The payments system of a modern economy is a peculiar mix of technological and institutional factors.
Trade takes time and involves some form of money or credit.
Going to the bank or arranging credits is expensive. However both the Baumol and the Tobin analysis was carried out in a partial equilibrium context. Here we address the task of considering the costs of banking in a closed strategic market game. Requests for single copies of a Paper will be filled by the Cowles Foundation within the limits of the supply.