Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • Article
  • Operations Research

Analyzing Scrip Systems

By: Kris Johnson, David Simchi-Levi and Peng Sun
  • Format:Print
ShareBar

Abstract

Scrip systems provide a nonmonetary trade economy for exchange of resources. We model a scrip system as a stochastic game and study system design issues on selection rules to match potential trade partners over time. We show the optimality of one particular rule in terms of maximizing social welfare for a given scrip system that guarantees players' incentives to participate. We also investigate the optimal number of scrips to issue under this rule. In particular, if the time discount factor is close enough to one, or trade benefits one partner much more than it costs the other, the maximum social welfare is always achieved no matter how many scrips are in the system. When the benefit of trade and time discount are not sufficiently large, on the other hand, injecting more scrips in the system hurts most participants; as a result, there is an upper bound on the number of scrips allowed in the system, above which some players may default. We show that this upper bound increases with the discount factor as well as the ratio between the benefit and cost of service. Finally, we demonstrate similar properties for a different service provider selection rule that has been analyzed in previous literature.

Keywords

"Repeated Games"; Stochastic Trust Game; Dynamic Program; P2P Lending; Scrip Systems; Artificial Currency; Non-monetary Trade Economies; Marketplace Matching; Currency; Operations; Game Theory

Citation

Johnson, Kris, David Simchi-Levi, and Peng Sun. "Analyzing Scrip Systems." Operations Research 62, no. 3 (May–June 2014): 524–534.
  • Find it at Harvard
  • Read Now

About The Author

Kris Johnson Ferreira

Technology and Operations Management
→More Publications

More from the Authors

    • March–April 2023
    • Manufacturing & Service Operations Management

    Market Segmentation Trees

    By: Ali Aouad, Adam Elmachtoub, Kris J. Ferreira and Ryan McNellis
    • 2022
    • Faculty Research

    Improving Human-Algorithm Collaboration: Causes and Mitigation of Over- and Under-Adherence

    By: Maya Balakrishnan, Kris Ferreira and Jordan Tong
    • March 2022
    • Faculty Research

    JOANN: Joannalytics Inventory Allocation Tool

    By: Kris Ferreira
More from the Authors
  • Market Segmentation Trees By: Ali Aouad, Adam Elmachtoub, Kris J. Ferreira and Ryan McNellis
  • Improving Human-Algorithm Collaboration: Causes and Mitigation of Over- and Under-Adherence By: Maya Balakrishnan, Kris Ferreira and Jordan Tong
  • JOANN: Joannalytics Inventory Allocation Tool By: Kris Ferreira
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College