A major concern in modern monetary theory has been the development of models where money is essential and yet substantive issues can be analyzed in a tractable manner. At the center of this effort is the framework proposed by Lagos and Wright
(2005), whose tractability depends on the fact that trade alternates between centralized and decentralized markets. A natural question to ask is whether the presence of centralized trading affects the essentiality of money. A widespread view is that money
remains essential in the Lagos—Wright framework as long as agents can only observe prices in the centralized market. In this paper we show that this is not the case. Indeed, the presence of centralized trading allows agents to use prices to sustain cooperation.
This suggests that an important friction for the essentiality of money is the lack of institutions that allow agents to coordinate behavior.

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