The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Utility Tokens as a Commitment to Competition
Published: 10/10/2024 | DOI: 10.1111/jofi.13389
ITAY GOLDSTEIN, DEEKSHA GUPTA, RUSLAN SVERCHKOV
We show that utility tokens can limit the rent‐seeking activities of two‐sided platforms with market power while preserving efficiency gains due to network effects. We model platforms where buyers and sellers can meet to exchange services. Tokens serve as the sole medium of exchange on a platform and can be traded in a secondary market. Tokenizing a platform commits a firm to give up monopolistic rents associated with the control of the platform, leading to long‐run competitive prices. We show how the threat of entrants can incentivize developers to tokenize and discuss cases where regulation is needed to enforce tokenization.