Money in the real and the virtual world: e‐money, c‐money and the demand for cb‐money

Aloys Prinz ()

Netnomics, 1999, vol. 1, issue 1, 11-35

Abstract: Electronic money seems to become a new form of means of payment, not only for the Internet. It therefore will compete with other means of payment as central bank money and credit cards. There is an extensive literature on the technical and security aspects of the several forms of electronic money, but only a few papers on the economic aspects exist. In this paper, a Lancaster approach to the demand for means of payment is employed to scrutinize closer the relationship between electronic money and central bank money and credit cards. It is shown that in a two characteristics world of liquidity (acceptability) and security, there is a place for electronic money. Furthermore, it is shown that at present none of the existing monies has the potential for being a dominant means of payment. However, if the network externality problem of electronic money can be solved, electronic money may supplant the others. Copyright Kluwer Academic Publishers 1999

Date: 1999
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DOI: 10.1023/A:1011441519577

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