Endogenous Currency Formation in an Online Environment: The Case of Diablo II
Review of Austrian Economics 29(1) 2016: 53-66
22 Pages Posted: 8 Dec 2013 Last revised: 2 Mar 2016
Date Written: September 1, 2014
This paper presents a case study of the emergence of currency from a barter economy. We use this case study to attempt to shed light on the relative importance of various types of frictions that lead to the emergence of money in search-theoretic models of currency formation. In particular, our study highlights the importance of exchange frictions relative to epistemic frictions. Using the records of an online message board dedicated to facilitating trades within the game, we document the emergence of currency and its stability over time.
Keywords: Exchange frictions, epistemic frictions, Kiyotaki-Wright, medium of exchange, Menger, money emergence, online societies
JEL Classification: E40, E42, E49
Suggested Citation: Suggested Citation