What drives businesses to transact with complementary currencies?

Ariane Reyns

Ecological Economics, 2024, vol. 220, issue C

Abstract: There is an ongoing debate on complementary currencies’ (CCs) contribution to a transition towards resilient and sustainable economies. As part of this debate, this paper investigates which factors lead to significant acceptance and sufficient growth of a CC from a bottom-up perspective, i.e., based on its members’ decisions. First, we identify the benefits and costs driving firms’ use of CCs and find four factors that constitute a trade-off: credit gains, reciprocity expectations, coordination costs, and intrinsic motivations. Second, we use an agent-based model to explore how these elements determine CCs’ success as a network. Our key finding is that the coupling of intrinsic motivation with preferential attachment – a phenomenon where members are more likely to transact with each other rather than with outsiders – may be the key to growth and acceptance: these results suggest that intrinsic motivation provides an incentive to join the network, but preferential attachment is the emerging economic rationale that drives firms’ acceptance of CCs. The identified trade-off and the theory of intrinsic motivation-preferential attachment provide new avenues to investigate under what conditions CCs contribute to resilient economies.

Keywords: Complementary currencies; Local currencies; Agent-based modelling; Small and medium enterprises (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:220:y:2024:i:c:s0921800924000788

DOI: 10.1016/j.ecolecon.2024.108181

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