Product market competition with crypto tokens and smart contracts

Jiri Chod and Evgeny Lyandres

Journal of Financial Economics, 2023, vol. 149, issue 1, 73-91

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.

Keywords: Crypto tokens; Smart contracts; Product market competition; Switching costs (search for similar items in EconPapers)
JEL-codes: E42 L13 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:149:y:2023:i:1:p:73-91

DOI: 10.1016/j.jfineco.2023.04.011

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