AN EMPIRICAL ANALYSIS OF INTERACTION IN TWO-SIDED MARKET OF LOCAL CURRENCY

Abstract

Considering local currency transactions as a two-sided market between consumers and merchants, this study develops an interaction model consisting consumers’ exchange behavior and merchants’ entry behavior. The model explicitly deals with inter-market and intra-market interactions between consumers and merchants. The interaction effects are quantified through the empirical analysis using stated preference data collected from four cities in Hiroshima prefecture. The results of the empirical analysis showed that there are significant positive inter-market and intra-market interactions. We also found that the intensity of consumers’ intra-market interaction depends on the degree of consumers’ place attachment. As a result of a simulation to evaluate the efficiency of the local currency project, it is suggested that the platformer can greatly improve the efficiency of the local currency project by providing a certain amount of subsidy to the merchants.