We present a model rationalizing the economic value of digital tokens for launching peer-to-peer platforms. By using the blockchain to transparently distribute tokens before the platform launches, a token sale overcomes later coordination failures between the platform’s users. This result follows from forward induction reasoning, under which the costly and observable action of token acquisition credibly communicates the intent to participate on the platform. Our framework demonstrates the applications of digital tokens to entrepreneurship, and offers guidance for both practitioners and regulators.

How much do students benefit from student loan subsidies? We investigate this question, exploiting a natural experiment: a demand shock due to the 2011 tightening of credit standards in the PLUS program. We first establish that the Bennett hypothesis is best explained by colleges charging large markups over their marginal costs, rather than by advantageous selection. Then we use our results to estimate that students plausibly capture less than 60 cents of each dollar of resources expended on loan subsidies. We discuss alternative approaches that would more directly benefit students.