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Google:PublicGoodsGame

In his book "The Wisdom of Crowds" the author James Surowiecky presents this game, introduced by the economists Ernst Fehr and Simon Gächter. This game, a variant of TheTragedyOfTheCommons and how to overcome it, illustrates nicely the thinking underlying OpenBusiness and ExtremeOpenBusiness.

The game is played by four people in a group (but can easily generalized to n>4 players):

Each player initially owns 20 tokens (could be real money or other wealth components).

The game lasts 4 rounds (for simplicity) .

On each round each player p can contribute tokens to the public pot (the commons) or not.

At the end of each round p has a guaranteed payout of 0.4 token for each token invested plus (and here comes the tricky part) 0.4 token for each token invested by some other player.

"The point is this: If every one keeps their money and invests nothing, they each walk away with twenty tokens. If everyone invests all their money, they each walk away with thirty-two tokens. The catch .. is that the smartest strategy ordinarily will be to invest nothing yourself and simply free ride off everyone else's contributions. But if everyone does that, there will be no contributions."

As long as the players played the game as an opaque business, the result was suboptimal (relative to the Pareto Optimum), because it allowed un-sanctioned conditional free-riding.

"The key to the system is making sure the conditional consenters keep cooperating, and the way to do that is to make sure that they don't feel like suckers. Fehr and Gächter tweaked the .. game to demonstrate: this time at the end of every round, they revealed, what each person had or had not contributed to the public spot, which made the free riders visible to everyone else."

Conversation

FridemarPache: Take as real world example SocialDomaining, where contributions to the common spot are money (that buys the domains) plus insightful postings (MarketsAreConversations)... contributions, that add value to the concept and Google rank of the involved domains for later sharing the gain in the group.

Discussion

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