How does a dominance assurance contract solve the free-rider problem? The mayor requiring participation seems to not reflect in other uses.
- Alex: Everyone signs up for the bonus right up until someone pushes it over the threshold, so all equilibria in theory are success states.
Why did your experimental subjects ever not contribute?
- Alex: Well… there’s real money on the line, so there is positive incentive, but not really opportunity costs or other costs: they’re already in the lab.
What about projects that should NOT be funded but get funded because folks want the bonus?
- Alex: Yeah you’re right… There could be a concept of Force Riders: folks jump on the wagon for bonuses and others are forced to pay for goods they didn’t want to pay for. We should study this.
- Other: You see this in practice on the Gitcoin platform: projects boasting kickbacks and promises of future airdrops for supporting garner outsized support. They’re having to play with these incentive structures in the field to shoot for outcomes on the platform.
Kickstarter isn’t really producing public goods, because the whole idea is that you’ll get a public good even if you don’t contribute
- Unanimous contract was the older solution to the same problem: you have a list of the people that would benefit, you have a price for each at or below what you believe to be the value of the good to each person. In a perfect information environment everyone agrees and the good is created. But in practice to can’t find these prices and things go awry.
- In the unanimous case, The Dominant Assurance contract slightly increases the likelihood of everyone signing but costs more if you have to pay out bonuses, so doesn’t seem like really an improvement.
What is the most exciting near and long-term use case of these contracts?
- Alex: Local public goods make a lot of sense to me: improving your neighborhood. And of course, smart contract based funding systems for blockchain protocols changes could certainly be a use case.