# Tokens vs money

Recently I began thinking about why the use of tokens for money is so popular. In casinos, I think that it is well justified, but there are some cases when those arguments are not useful. For example, why would an amusement park make you buy tickets that say exactly how much is it worth (for example, buying a ticket for 5 dollars at the cost of....5 dollars). You know how much money you are spending, so the link between value and tokens is not broken. What positive effects does that measure have in the amusement park economy? Why?

1. Disneyland takes in about \$8 billion a year --- not all of it through tokens, but let's say they sell, oh, \$4 billion a year worth of tokens. People often buy tokens several hours before they use them, so Disneyland gets to hold \$4 billion a year for, oh, say, four hours longer than they would without tokens. At 6\% annual interest, that's worth about \$100,000 a day to them.

2. Some people don't use all their tokens and don't bother to cash them in, which means you're effectively charging those people more than others. So tokens can be an effective way to price discriminate. To make sense of this, you'd have to explain why the people who don't cash in the tokens are (on average) the people you want to discriminate against, but I don't think it would be hard to come up with a plausible story along these lines.

• I am a bit skeptical about your first point. I can't imagine Disneyland is accruing interest on these deposits. Much will be held in cash, which yields no return and I doubt the rest is being invested or deposited considering the need to be very liquid in this arrangement. I think your second point valid. In addition, I think the ability to control the market is useful. – Jamzy Dec 9 '14 at 3:17
• 2. could be expanded by challenging the author's assumption of universal 1:1 exchange rate. If the park has market power, then it likely wants to price discriminate (via targeted coupons, say). Some people get a 1:1 exchange rate, and some people get a 1.1:1 exchange rate. Etc. – Bill Jan 2 '17 at 18:51
• Do amusement parks do the ticket thing any more? I thought that went out during the 1980s. Disney World is "ride all day." Other amusement parks I know of are also "ride all day." – Bill Jan 2 '17 at 18:53

A two reasons additional to Steven's:

• Tokens can be individualized and smoothen the payment process. You can get a token exactly worth a ride, and the queues at the rides are shorter because nobody needs to get change for a 10\\$ bill.
• You forget the value of tokens easier. Everytime you pay cash, you see in front of your eyes how much poorer you are getting. This direct punishment / reminder does not necessarily happen with tokens (But you need a behavioral story to make this work).

A similar thing exists with credit cards, which both facilitate the payment process and also make people care less about the amounts they're spending [reference needed].

There are many reasons that make tokens "better" than cash: they smoothen the payment process as foobar said previously, they are a service for customer that can plan how much they will spend before having strong incentives to spend their money ("look child, we have only one token left, so you have to choose between this two expensive products").

But the main reason is far more cynical: tokens are not cash, and if you make things right (different types of tokens - color for instance - for two consecutive days, counting how much tokens are out and in each day, tokens cannot be converted to cash) it will have a direct impact on theft of cash by persons handling it. So basically tokens are a way of fighting theft of money. There is a similar (but not exactly the same) idea in some places where for social welfare vouchers are given instead of cash: it is for prevent a specific behavior (in this case to prevent people on welfare in buying tobacco or alcohol with their social welfare money).

• Just to elaborate ever so slightly on what Sylvain is saying: If people pay cash to the ride operators, then you've got to monitor every ride operator. If they pay cash only at the ticket booth, then you've got to monitor just the ticket booth. – Steven Landsburg Dec 6 '14 at 20:03

One additional reason to Steven's, Sylvain's and Foobar's: Since you "pay" in advance you are more willing to actually use it. You will tend not to ask for reimbursement and give away the last tokens in exchange for additional amusement which you would not consider if you had to buy additional tokens to enjoy it.