Goldstein, Itay
[VerfasserIn]
;
Gupta, Deeksha
[Sonstige Person, Familie und Körperschaft];
Sverchkov, Ruslan
[Sonstige Person, Familie und Körperschaft]
Initial Coin Offerings As a Commitment to Competition
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 10, 2019 erstellt
Beschreibung:
We show that Initial Coin Offerings (ICOs) can limit rent-seeking activities of large firms with market power while preserving efficiency gains due to network effects. We model ICOs of utility tokens, which can be used to finance development of online platforms where buyers and sellers can meet to exchange services or goods. Utility tokens serve as the sole medium of exchange on a platform and can be traded in a secondary market. We show that such a financing mechanism allows an entrepreneur to give up monopolistic rents associated with the control of the platform and make a credible commitment to long-run competitive prices. The entrepreneur optimally chooses to have an ICO, rather than operate as a monopolist, only if future consumers of the platform participate in financing. ICOs, therefore, endogenously require crowd-funding to be viable