Product market competition with crypto tokens and smart contracts

Jiri Chod, Evgeny Lyandres*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

15 Scopus citations

Abstract

This paper models benefits of quoting output price in units of crypto token under duopolistic product market competition with switching costs. Pricing output in tokens provides a firm with a de facto second-mover advantage, raising its equilibrium profit. In addition, the firm can further increase its equilibrium profit by committing via a smart contract to the number of tokens sold. By focusing on utility tokens used at the product market competition stage, the paper highlights potential benefits of issuing crypto tokens that extend beyond the advantages of issuing security tokens at the venture financing stage.

Original languageEnglish
Pages (from-to)73-91
Number of pages19
JournalJournal of Financial Economics
Volume149
Issue number1
DOIs
StatePublished - Jul 2023

Funding

FundersFunder number
Blockchain Research Institute
University of Southern
Boston College
Boston University
Cornell University
University of Rochester
Florida Atlantic University
Tel Aviv University
Jeremy Coller Foundation

    Keywords

    • Crypto tokens
    • Product market competition
    • Smart contracts
    • Switching costs

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