Empirical models of consumer and merchant behavior in the two-sided market of local currency

Abstract

Local currency is one options for revitalization of local regions. In this study, we model consumer and merchant behavior in the two-sided market of local currency where, inter-side and intra-side interactions among consumers and merchants are considered. For the consumer side, we model whether they use local currency and if so, how much money they exchange. For the merchant side, we model whether they accept local currency payment. Empirical models were developed using stated preference survey data collected in four cities of Hiroshima Prefecture. Empirical results showed that inter-side interactions between consumers and merchants significantly affect the behaviors of both. We also found that consumers’ intra-side interaction and their level of place attachment significantly affects the behavior of consumers.