Platform Precommitment via Decentralization
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Summary:
I study an entrepreneur’s incentives to build a decentralized platform using a blockchain. The entrepreneur can either build the platform using a regular company and retain control of the platform, or build the platform using a blockchain and surrender control of the platform. In either case, the platform’s users experience a locked-in effect. I show that a decentralized implementation of the platform is both (i) more profitable for the entrepreneur and (ii) a Pareto improvement, if and only if the size of the locked-in effect exceeds some threshold. Further, progressive decentralization through airdrops can be optimal.
Series:
Working Paper No. 2024/028
Subject:
Blockchain and DLT Labor Revenue sharing Self-employment Taxes Technology
Frequency:
regular
English
Publication Date:
February 9, 2024
ISBN/ISSN:
9798400267284/1018-5941
Stock No:
WPIEA2024028
Format:
Paper
Pages:
48
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