The Review of Austrian Economics

, Volume 29, Issue 1, pp 53–66 | Cite as

Endogenous currency formation in an online environment: The case of Diablo II

  • Alexander William Salter
  • Solomon Stein


This paper presents a case study of the emergence of currency from a barter economy in an online game community. 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.


Exchange frictions Epistemic frictions Kiyotaki-Wright Medium of exchange Menger Money emergence Online societies 

JEL Codes

E40 E42 E49 


  1. Alchian, A. A. (1977). Why Money? Journal of Money, Credit and Banking, 9(1), 133–40.CrossRefGoogle Scholar
  2. Aliprantis, C. D., Camera, G., & Puzzello, D. (2006). Matching and anonymity. Economic Theory, 29, 415–432.CrossRefGoogle Scholar
  3. Aliprantis, C. D., Camera, G., & Puzzello, D. (2007a). Contagion equilibria in a monetary model. Econometrica, 75(1), 277–282.CrossRefGoogle Scholar
  4. Aliprantis, C. D., Camera, G., & Puzzello, D. (2007b). Anonymous markets and monetary trading. Journal of Monetary Economics, 54(7), 1905–1928.CrossRefGoogle Scholar
  5. Araujo Luis, Braz Camargo (2008) Money and memory. Working PaperGoogle Scholar
  6. Araujo Luis, Braz Camargo (2010) Money versus memory. Working PaperGoogle Scholar
  7. Axtell, R. L. (2007). What economic agents Do: How cognition and interaction lead to emergence and complexity. Review of Austrian Economics, 20(2), 105–122.CrossRefGoogle Scholar
  8. Brown, P. M. (1996). Experimental evidence on money as a medium of exchange. Journal of Economic Dynamics and Control, 20(4), 583–600.CrossRefGoogle Scholar
  9. Buchanan, J. M. (1964). What should economists Do? Southern Economic Journal, 30(3), 213–222.CrossRefGoogle Scholar
  10. Castronova, E. (2004). The price of bodies: A hedonic analysis of avatar attributes in a synthetic world. Kyklos, 57(2), 173–196.CrossRefGoogle Scholar
  11. Castronova, E. (2006). On the research value of large games: Natural experiments in norrath and Camelot. Games and Culture, 1(2), 163–186.CrossRefGoogle Scholar
  12. Duffy, J. (2001). Learning to speculate: Experiments with artificial and real agents. Journal of Economic Dynamics and Control, 25(3–4), 295–319.CrossRefGoogle Scholar
  13. Duffy John (2008) Macroeconomics: A Survey of Laboratory Research. The Handbook of Experimental Economics, 2, A. Roth and J. Kagel, eds. Princeton: Princeton University PressGoogle Scholar
  14. Duffy, J., & Ochs, J. (1999). Emergence of money as a medium of exchange: An experimental study. American Economic Review, 89(4), 847–877.CrossRefGoogle Scholar
  15. Duffy, J., & Ochs, J. (2002). Intrinsically worthless objects as media of exchange: Experimental evidence. International Economic Review, 43(3), 637–673.CrossRefGoogle Scholar
  16. Giansante Simone (2006) Social Networks and Medium of Exchange. Working PaperGoogle Scholar
  17. Hasker Kevin, Ahmet Tahmilci (2008) The Rise of Money: An Evolutionary Analysis of the Origins of Money. Working PaperGoogle Scholar
  18. Kawagoe, T. (2007). Learning to Use a perishable good as money. Multi-Agent-Based Simulation VII, 4442, 96–111.CrossRefGoogle Scholar
  19. Kiyotaki, N., & Wright, R. (1989). On money as a medium of exchange. Journal of Political Economy, 97(4), 927–54.CrossRefGoogle Scholar
  20. Kiyotaki, N., & Wright, R. (1991). A contribution to the pure theory of money. Journal of Economic Theory, 53(2), 215–35.CrossRefGoogle Scholar
  21. Kiyotaki, N., & Wright, R. (1993). A search-theoretic approach to monetary economics. American Economic Review, 83(1), 63–77.Google Scholar
  22. Kocherlakota, N. R. (2002). The Two-money theorem. International Economic Review, 43(2), 333–346.CrossRefGoogle Scholar
  23. Kocherlakota, N. R., & Neil, W. (1998). Incomplete record-keeping and optimal payment arrangements. Journal of Economic Theory, 81(2), 272–289.CrossRefGoogle Scholar
  24. Lagos R, Wright R (2007) When is Money Essential? A Comment on Aliprantis, Camera and Puzzello. Working PaperGoogle Scholar
  25. Luther William J. Forthcoming. Evenly Rotating Economy. Review of Austrian Economics.Google Scholar
  26. Luther William J (2011) Is Money Inessential in Equilibrium? Working PaperGoogle Scholar
  27. Menger, K. (1892). On the origins of money. The Economic Journal, 2(6), 239–255.CrossRefGoogle Scholar
  28. Radford, R. A. (1945). The economic organisation of a P.O.W. Camp. Economica, 12(48), 189–201.CrossRefGoogle Scholar
  29. Seagren, C. W. (2011). Examining social processes with agent-based models. Review of Austrian Economics, 24(1), 1–17.CrossRefGoogle Scholar
  30. Selgin, G. A. (2008). Good money: Birmingham button makers, the royal mint, and the beginnings of modern coinage, 1775–1821. Ann Arbor: University of Michigan Press.Google Scholar
  31. Stein Solomon M (2013) Take Your Dupes, and Sell Them to Charsi: Governance, Legitimacy, and Economic Culture in Diablo II. Working PaperGoogle Scholar
  32. von Mises, L. (2008). Human action: A treatise on economics (Scholar’s edition). Auburn: Ludwig von Mises Institute.Google Scholar
  33. Williamson, S., & Wright, R. (1994). Barter and monetary exchange under private information. American Economic Review, 84(1), 104–123.Google Scholar
  34. Wagner, R. E. (2010). Mind, society, and human action: Time and knowledge in a theory of social economy. London: Routledge.Google Scholar

Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  1. 1.Department of EconomicsBerry CollegeMount BerryUSA
  2. 2.Department of EconomicsGeorge Mason UniversityFairfaxUSA

Personalised recommendations