Popularity of token money is ⬆️ to allocate class seats, food donations, holiday homes,… My #JMP asks 1⃣ Does price-setting with tokens work as in normal markets? 2⃣ Can token money have advantages even when using real money possible? Surprisingly: NO, YES! 1/🧵

Hi #EconTwitter, I am Manpreet Singh, PhD @PSEinfo . My #EconJMP analyses large renewable capacity auctions, focusing on India. I study 2 issues: 1⃣ Theory: Cost-efficiency of firms selected in India's auction. 2⃣ Empirical: Impact of efficient alternatives on public funds 🧵

I'm very grateful for the help of my fantastic supervisors (Olivier Tercieux & @LiamWrenLewis) and to the platform for sharing the amazing dataset! 📄 Full paper: https://t.co/Q3O1Ztz7hg 🌐 Website: https://t.co/x8TJTX2E2l #EconTwitter #EconJobMarket #JMP 17/🧵

💡 Takeaways 1⃣ Lessons from traditional markets may not easily extend to token economies 2⃣ Market designs without real money can have advantages even in settings where money is common ➡️exciting opportunities for more MD research 👏@econD47 @mip_eu 16/🧵

Evidence, in line different expectations: Using a proxy for personal residences (single listing & < 10 reviews/year), 97% of exchange platform listings are real homes, but only ~10% of Airbnb guest ratings involve plausibly personal residences, rest are quasi-professional! 15/🧵

Why do people stick to house exchange platform, even with worse terms of trade? 🤝 Exchange guests likely behave better – everyone has hosted themselves & knows the effort involved. Guests expect a personal, not hotel-like experience. It's about respect & connection! 14/🧵

Shouldn’t users with nice homes leave for Airbnb? If it was just about money, they should! Hedonic ML model + scraped Airbnb data => Most users with fancy homes could make >500$ “for free” by doing same hosting/visiting combo on Airbnb (host 1x & visit similar house 1x) 13/🧵

Wait…. doesn’t rationing have side effects? Turns out, not here. The big price drop did not increase misallocation (actually, it slightly improved the match between home size and guest party size) and did not reduce affected hosts’ effort nor their participation! 12/🧵

Test next prediction: Exploit a big reform of pricing algorithm in a Diff-in-Diff event-study. Many fancy homes became much cheaper (>30%), others didn’t change much. The lower prices increased the supply of nice homes! (Usually, we’d think rent control reduces supply ) 11/🧵

Sounds like a funny theory? With the super detailed data I show that the same user hosts 5x less even at moderately high token wealth (enough for 30 nights in a nice home) compared to low wealth. People quickly become satiated with token money! 10/🧵

💡 Intuition: Each person can only go on so many vacations. If my nice home earns a lot per booking, I’ll quickly have enough tokens for my own visits and stop hosting, because I can’t spend tokens on anything but visits. With lower prices, I need to host more often! 9/🧵

The model has 2 key predictions 1⃣ Lower prices can increase supply of nice homes 2⃣ That happens when income effects are very strong In this case, rationing also increases utilitarian welfare 8/🧵

Platform decides how many tokens users pay for big/nice vs. small/plain home. Should they clear market as usual? Develop stylized model of exchange economy to guide empirical analysis ✅ endogenous budgets & supply Compare competitive equilibrium to rationing (aka rent control)

Study big online platform where 100,000+ homes are traded each year with token money 🤩 Company gave me full database: every transaction & request over 10+ years Surprisingly, I show there are more personal (not professional) family homes listed here than on Airbnb 6/🧵

This paper 1⃣ With endogenous budgets & supply, pricing with tokens doesn’t work as in normal markets: Price controls & rationing can increase supply! 2⃣ Many people prefer token money, choosing it although they would be financially better off on for-money platforms 5/🧵

Literature so far: -Proposes token money only when 💵 repugnant (oversubscribed classes, food donations) -sets goods’ prices (in tokens) to clear markets -only studied allocation problems (supply & token budgets exogenous) but not exchange economies 4/🧵

Some real-world examples 🏡 Home exchanges: Host in your home to earn tokens, spend tokens to stay elsewhere 👶 Baby-sitting co-ops: babysit others’ kids to earn tokens, pay others to babysit yours 🏦 @FeedingAmerica 👩‍🎓 @_Coursematch (@ebudish) … 3/🧵

What is token money? A specialized, single-purpose currency. 🪙 You spend tokens on services within the community, no outside use. 🪙 Often, you need to earn tokens by contributing (e.g. babysitting, hosting guests, trade books, ...) 🪙 Can't buy/sell tokens for real money 2/🧵

I'm very grateful for the help of my fantastic supervisors (Olivier Tercieux and @LiamWrenLewis) & to the platform for sharing the amazing dataset! 📄 Full paper: https://t.co/Q3O1Ztz7hg 🌐 Website: https://t.co/x8TJTX2E2l #EconTwitter #EconJobMarket #JMP 17/🧵

💡 Takeaways 1⃣ Lessons from traditional markets may not easily extend to token economies 2⃣ Market designs without real money can have advantages even in settings where money is common => exciting opportunities for more MD research 👏 16/🧵