Analyzing Scrip Systems
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Simchi-Levi_Analyzing scrip.pdf
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224.1 KB
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Author(s)
Johnson, Kristine Dianne
Simchi-Levi, David
Sun, Peng
Date Issued
June 2014
Journal
Operations Research
Publisher
Institute for Operations Research and the Management Sciences (INFORMS)
Citation
Johnson, Kris, David Simchi-Levi, and Peng Sun. “Analyzing Scrip Systems.” Operations Research 62, no. 3 (June 2014): 524–534.
Version
Author's final manuscript
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.
MIT Department
Massachusetts Institute of Technology. Engineering Systems Division
Massachusetts Institute of Technology. Operations Research Center
Sloan School of Management
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Creative Commons Attribution-Noncommercial-Share Alike
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DOI of Published Version
https://doi.org/10.1287/opre.2014.1260
