Token-based incentive protocol design for online exchange systems

Jie Xu, William Zame, Mihaela Van Der Schaar

Research output: Chapter in Book/Report/Conference proceedingConference contribution

1 Scopus citations


In many online exchange systems, agents provide services to satisfy others agents' demands. Typically, the provider incurs a (immediate) cost and hence, it may withhold service. As a result, the success of the exchange system requires proper incentive mechanisms to encourage service provision. This paper studies the design of such systems that are operated based on the exchange of tokens, a simple internal currency which provides indirect reciprocity among agents. The emphasis is on how the protocol designer should choose a protocol - a supply of tokens and suggested strategies - to maximize service provision, taking into account that impatient agents will comply with the protocol if and only if it is in their interests to do so. Agents' interactions are modeled as a repeated game. We prove that the these protocols have a simple threshold structure and the existences of equilibria. Then we use this structural property to design exchange strategies that maximize the system efficiency. Among all protocols with the same threshold, we find that there is a unique optimal supply of tokens that balances the token distribution in the population and achieves the optimal efficiency. Such token protocols are proven to be able to achieve full efficiency asymptotically as agents become sufficient patient or the cost becomes sufficient small.

Original languageEnglish (US)
Title of host publicationGame Theory for Networks - Third International ICST Conference, GameNets 2012, Revised Selected Papers
Number of pages11
StatePublished - Dec 1 2012
Externally publishedYes
Event3rd International ICST Conference on Game Theory for Networks, GameNets 2012 - Vancouver, BC, Canada
Duration: May 24 2012May 26 2012

Publication series

NameLecture Notes of the Institute for Computer Sciences, Social-Informatics and Telecommunications Engineering
Volume105 LNICST
ISSN (Print)1867-8211


Other3rd International ICST Conference on Game Theory for Networks, GameNets 2012
CityVancouver, BC


  • agents
  • efficiency
  • repeated games
  • token protocols

ASJC Scopus subject areas

  • Computer Networks and Communications


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