Is it the person who seeks funding who has to pay the refunds? If so it means they must make an investment before starting the project in order to be able to ask for funds. But If it’s the platform paying out the refunds it introduces a different problem, where someone can profit by starting a project no one would want to fund, let a friend contribute some but not enough to fund it, and then split the refund money with that friend.
Either way, what happens with project that are harmful, rather than beneficial (as we can assume most project to be)? In such a system it seems you’re not only incentivized to support beneficial projects, but also harmful ones, in the hope that they won’t get fully funded and you’ll get a refund. Will that cause more harmful project to succeed? Or will the “pivotal backers” never actually back the project and it would still fail? In that case (and if refunds come out of the campaigner’s pocket) it would actually disincentivize harmful project by making campaigners pay for them (yet will still reward early backers for backing them).
Overall I this idea is very interesting and I think I like it. I’d love to see a crowdfunding platform experiment with it.
In reality I’m not sure the trap would remain effective for long enough for too many of those to start turning up. Humans aren’t rigidly CDTish. They’ll catch on. Perhaps many professional traders already have some principle against playing games of collective chicken.
I guess a good question here is… is the opportunity cost of assessing the failure rate, to the level of accuracy where the risk of project success is low enough that you can be sure that you’ll get your refund bonus, actually lower than the refund bonus. I think it has to be proportionate to it! I’d guess that earnest pledger’s work, figuring out whether the project is good, would be roughly equally to the exploitative pledger’s work of figuring out whether the project will succeed. But I think the answer is no. For the exploitative pledger, success is a risk, for the earnest pledger, success is a boon, the earnest pledger doesn’t need the refund bonus to be so high to justify their time investment because they don’t have that risk to offset, so the refund bonus will be too low to justify the work for most exploitative pledgers.
So in most cases the refund bonus extraction game wont be profitable. But that doesn’t mean it’ll be unprofitable in all cases. Sometimes the analysis will be especially easy (the product will be clearly useless). And sometimes one extractor’s analysis will leak, and others will imitate them (creating a very dangerous game for them all), or, oh, one extractor will pledge multiple times with alts ..
Is it the person who seeks funding who has to pay the refunds? If so it means they must make an investment before starting the project in order to be able to ask for funds. But If it’s the platform paying out the refunds it introduces a different problem, where someone can profit by starting a project no one would want to fund, let a friend contribute some but not enough to fund it, and then split the refund money with that friend.
Either way, what happens with project that are harmful, rather than beneficial (as we can assume most project to be)? In such a system it seems you’re not only incentivized to support beneficial projects, but also harmful ones, in the hope that they won’t get fully funded and you’ll get a refund. Will that cause more harmful project to succeed? Or will the “pivotal backers” never actually back the project and it would still fail? In that case (and if refunds come out of the campaigner’s pocket) it would actually disincentivize harmful project by making campaigners pay for them (yet will still reward early backers for backing them).
Overall I this idea is very interesting and I think I like it. I’d love to see a crowdfunding platform experiment with it.
In reality I’m not sure the trap would remain effective for long enough for too many of those to start turning up. Humans aren’t rigidly CDTish. They’ll catch on. Perhaps many professional traders already have some principle against playing games of collective chicken.
I guess a good question here is… is the opportunity cost of assessing the failure rate, to the level of accuracy where the risk of project success is low enough that you can be sure that you’ll get your refund bonus, actually lower than the refund bonus. I think it has to be proportionate to it! I’d guess that earnest pledger’s work, figuring out whether the project is good, would be roughly equally to the exploitative pledger’s work of figuring out whether the project will succeed. But I think the answer is no. For the exploitative pledger, success is a risk, for the earnest pledger, success is a boon, the earnest pledger doesn’t need the refund bonus to be so high to justify their time investment because they don’t have that risk to offset, so the refund bonus will be too low to justify the work for most exploitative pledgers.
So in most cases the refund bonus extraction game wont be profitable. But that doesn’t mean it’ll be unprofitable in all cases. Sometimes the analysis will be especially easy (the product will be clearly useless). And sometimes one extractor’s analysis will leak, and others will imitate them (creating a very dangerous game for them all), or, oh, one extractor will pledge multiple times with alts ..