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Valuation of Loyalty Tokens

Author

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  • Shah, Anand

Abstract

Valuation of tokens is a wager on the platform adoption. This study investigates the effect of platform adoption on the valuation of loyalty tokens and the contingent claims with the token as an underlying. The platform adoption is modelled using the classical Bass Model. The example selected is that of airmiles, but the approach could be extended to loyalty token with other numeraires as well. After assuming few monetary policy rules for the platform governance, the proposed simple model predicts that the Bass Model parameters could have significant influence on the valuation of loyalty tokens and the contingent claims with the token as an underlying.

Suggested Citation

  • Shah, Anand, 2022. "Valuation of Loyalty Tokens," MPRA Paper 111986, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:111986
    as

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    File URL: https://mpra.ub.uni-muenchen.de/111986/1/MPRA_paper_111986.pdf
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    References listed on IDEAS

    as
    1. Cong, Lin William & Li, Ye & Wang, Neng, 2022. "Token-based platform finance," Journal of Financial Economics, Elsevier, vol. 144(3), pages 972-991.
    2. Michael Sockin & Wei Xiong, 2020. "A Model of Cryptocurrencies," NBER Working Papers 26816, National Bureau of Economic Research, Inc.
    3. Kenneth Rogoff & Yang Yous, 2023. "Redeemable Platform Currencies," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(2), pages 975-1008.
    4. Frank M. Bass & Trichy V. Krishnan & Dipak C. Jain, 1994. "Why the Bass Model Fits without Decision Variables," Marketing Science, INFORMS, vol. 13(3), pages 203-223.
    5. Frank M. Bass, 1969. "A New Product Growth for Model Consumer Durables," Management Science, INFORMS, vol. 15(5), pages 215-227, January.
    6. Lin William Cong & Ye Li & Neng Wang, 2021. "Tokenomics: Dynamic Adoption and Valuation [The demand of liquid assets with uncertain lumpy expenditures]," The Review of Financial Studies, Society for Financial Studies, vol. 34(3), pages 1105-1155.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Tokenomics; Cryptocurrencies; Initial Coin Offering (ICO); Blockchain applications; Bass Model; Option pricing with Bass Model parameters;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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