Analyzing Scrip Systems

Kris Johnson (), David Simchi-Levi () and Peng Sun ()
Additional contact information
Kris Johnson: Operations Research Center, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139
David Simchi-Levi: Engineering Systems Division, Department of Civil and Environmental Engineering, and Operations Research Center, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139
Peng Sun: The Fuqua School of Business, Duke University, Durham, North Carolina 27708

Operations Research, 2014, vol. 62, issue 3, 524-534

Abstract: Scrip systems provide a nonmonetary trade economy for exchange of resources. We model a scrip system as a stochastic game and study system design issues on selection rules to match potential trade partners over time. We show the optimality of one particular rule in terms of maximizing social welfare for a given scrip system that guarantees players' incentives to participate. We also investigate the optimal number of scrips to issue under this rule. In particular, if the time discount factor is close enough to one, or trade benefits one partner much more than it costs the other, the maximum social welfare is always achieved no matter how many scrips are in the system. When the benefit of trade and time discount are not sufficiently large, on the other hand, injecting more scrips in the system hurts most participants; as a result, there is an upper bound on the number of scrips allowed in the system, above which some players may default. We show that this upper bound increases with the discount factor as well as the ratio between the benefit and cost of service. Finally, we demonstrate similar properties for a different service provider selection rule that has been analyzed in previous literature.

Keywords: repeated games; stochastic games; dynamic program; game theory; P2P networks; scrip systems; artificial currency; nonmonetary trade economies (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://dx.doi.org/10.1287/opre.2014.1260 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:62:y:2014:i:3:p:524-534

Access Statistics for this article

More articles in Operations Research from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().