The Power of Two in Token Systems

In economies without monetary transfers, token systems serve as an alternative to sustain cooperation and increase efficiency. This paper studies whether a token-based economy can be effective in marketplaces with thin exogenous supply. We consider a marketplace in which at each time period one agent requests a service, one agent provides the service, and one token (artificial currency) is used to pay for service provision. The number of tokens each agent has represents the difference between th