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Capitalising the Network Externalities of New Land Supply in the Metaverse

Author

Listed:
  • Kanis Saengchote
  • Voraprapa Nakavachara
  • Yishuang Xu
Abstract
When land becomes more connected, its value can change because of network externalities. This idea is intuitive and appealing to developers and policymakers, but documenting their importance is empirically challenging because it is difficult to isolate the determinants of land value in practice. We address this challenge with real estate in The Sandbox, a virtual economy built on blockchain, which provides a series of natural experiments that can be used to estimate the causal impact of land-based of network externalities. Our results show that when new land becomes available, the network value of existing land increases, but there is a trade-off as new land also competes with existing supply. Our work illustrates the benefits of using virtual worlds to conduct policy experiments.

Suggested Citation

  • Kanis Saengchote & Voraprapa Nakavachara & Yishuang Xu, 2023. "Capitalising the Network Externalities of New Land Supply in the Metaverse," PIER Discussion Papers 203, Puey Ungphakorn Institute for Economic Research.
  • Handle: RePEc:pui:dpaper:203
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    File URL: https://www.pier.or.th/files/dp/pier_dp_203.pdf
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    References listed on IDEAS

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    Cited by:

    1. Ante, Lennart & Wazinski, Friedrich-Philipp & Saggu, Aman, 2023. "Digital real estate in the metaverse: An empirical analysis of retail investor motivations," Finance Research Letters, Elsevier, vol. 58(PA).

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    More about this item

    Keywords

    Metaverse; NFT; Hedonic Land Price; Network Externalities; Natural Experiment;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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