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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
Article

Abstract

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.

Keywords

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

JEL Codes

E40 E42 E49 

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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

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