Wasn’t it Ariely’s Predictably Irrational that went over market norms vs. tribe norms? If you just had ordinary people start doing this, I would guess it would crash and burn for the obvious market-norm reasons (the urge to game the system, basically). And some ew-squick power disparity stuff if this is ever enforced by a third party or even social pressure.
Empirically speaking, this system has worked in our house (of 7 people, for about 6 months so far). What kind of gaming the system were you thinking of?
We do use social pressure: there is social pressure to do your contracted chores, and keep your chore point balance positive. This hasn’t really created power disparities per se.
What kind of gaming the system were you thinking of?
If the idea is to say exactly how much you are willing to pay, there would be an incentive to:
1) Broadcast that you find all labor extra unpleasant and all goods extra valuable, to encourage people to bid high
2) Bid artificially lower values when you know someone enjoys a labor / doesn’t mind parting with a good and will bid accordingly.
In short, optimal play would involve deception, and it happens to be a deception of the sort that might not be difficult to commit subconsciously. You might deceive yourself into thinking you find a chore unpleasant—I have read experimental evidence to support the notion that intrinsically rewarding tasks lose some of their appeal when paired with extrinsic rewards.
No comment on whether the traditional way is any better or worse—I think these two testimonials are sufficient evidence for this to be worth people who have a willing human tribe handy to try it, despite the theoretical issues. After all,
we trust each other not to be cheats and jerks. That’s true love, baby
Edit: There is another, more pleasant problem: If you and I are engaged in trade, and I actually care about your utility function, that’s going to effect the price. The whole point of this system is to communicate utility evenly after subtracting for the fact that you care about each other (otherwise why bother with a system?)
Concrete example: We are trying to transfer ownership of a computer monitor, and I’m willing to give it to you for free because I care about you. But if I were to take that into account, then we are essentially back to the traditional method. I’d have to attempt to conjure up the value at which i’d sell the monitor to someone I was neutral towards.
Of course, you could just use this as an argument stopper—whenever there is real disagreement, you use money to effect an easy compromise. But then there is monetary pressure to be argumentative and difficult, and social pressure not to be—it would be socially awkward and monetarily advantageous if you were constantly the one who had a problem with unmet needs.
1) Broadcast that you find all labor extra unpleasant and all goods extra valuable, to encourage people to bid high
But if other people bid high, then you have to pay more. And they will know if you bid lower, because the auctions are public. How does this help you?
2) Bid artificially lower values when you know someone enjoys a labor / doesn’t mind parting with a good and will bid accordingly.
I don’t understand how this helps you either; if you bid lower and therefore win the auction, then you have to do the chore for less than you value it at. That’s no fun.
The way our system works, it actually gives the lowest bidder, not their actual bid, but the second lowest bid minus 1; that way you don’t have to do bidding wars, and can more or less just bid what you value it at. It does create the issue that you mention—bid sniping, if you know what the lowest bidder will bid you can bid just above it so they get as little as possible—but this is at the risk of having to actually do the chore for that little, because bids are binding.
I’d very much like to understand the issues you bring up, because if they are real problems, we might be able to take some stabs at solving them.
whenever there is real disagreement, you use money to effect an easy compromise.
This has become somewhat of a norm in our house. We can pass around chore points in exchange for rides to places and so forth; it’s useful, because you can ask for favors without using up your social capital. (Just your chore points capital, which is easier to gain more of and more transparent.)
if you bid lower and therefore win the auction, then you have to do the chore for less than you value it at. That’s no fun.
You only do this when you plan to be the buyer. The idea is to win the auction and become the buyer, but putting up as little money as possible. If you know that the other guy will do it for $5, you bid $6, even if you actually value it at $10. As you said, I’m talking about bid sniping.
But if other people bid high, then you have to pay more.
Ah, I should have written “broadcast that you find all labor extra unpleasant and all goods extra valuable when you are the seller (giving up a good or doing a labour) so that people pay you more to do it.”
If you’re willing to do a chore for _$10, but you broadcast that you find it more than -$10 of unpleasantness, the other party will be influenced to bid higher—say, $40. Then, you can bid $30, and get paid more. It’s just price inflation—in a traditional transaction, a seller wants the buyer to pay as much as they are willing to pay. To do this, the seller must artificially inflate the buyer’s perception of how much the item is worth to the seller. The same holds true here.
When you intend to be the buyer you do the opposite—broadcast that you’re willing to do the labor for cheap to lower prices, then bid snipe. As in a traditional transaction, the buyer wants the seller to believe that the item is not of much worth to the buyer. The buyer also has to try to guess the minimum amount that the seller will part with the item.
it actually gives the lowest bidder, not their actual bid, but the second lowest bid minus 1
So what I wrote above was assuming the price was a midpoint between the buyer’s and seller’s bid, which gives them both equal power to set the price. This rule slightly alters things, by putting all the price setting power in the buyer’s hands.
Under this rule, after all the deceptive price inflation is said and done you should still bid an honest $10 if you are only playing once—though since this is an iterated case, you probably want to bid higher just to keep up appearances if you are trying to be deceptive.
One of the nice things about this rule is that there is no incentive to be deceptive unless other people are bid sniping. The weakness of this rule is that it creates a stronger incentive to bid snipe.
Price inflation (seller’s strategy) and bid sniping (buyer’s strategy) are the two basic forms of deception in this game. Your rule empowers the buyer to set the price, thereby making price inflation harder at the cost of making bid sniping easier. I don’t think there is a way around this—it seems to be a general property of trading. Finding a way around it would probably solve some larger scale economic problems.
There are two ways I know of that the market can try to defeat bid sniping, and one way a bidder can (that I know of).
Our system does not display the lowest bid, only the second lowest bid. For a one-shot auction where you had poor information about the others preferences, this would solve bid sniping. However, in our case, chores come up multiple times, and I’m pretty sure that it’s public knowledge how much I bid on shopping, for example.
If you’re in a situation where the lowest bid is hidden, but your bidding is predictable, you can sometimes bid higher than you normally would. This punishes people who bid less than they’re willing to actually do the chore for, but imposes costs on you and the market as a whole as well, in the form of higher prices for the chore.
A third option, which we do not implement (credit to Richard for this idea), is to randomly award the auction to one of the two (or n) lowest bidders, with probability inversely related to their bid. In particular, if you pick between the lowest 2 bidders, both have claimed to be willing to do the job for the 2nd bidder’s price (so the price isn’t higher and noone can claim they were forced to do something for less than they wanted). This punishes bid-snipers by taking them at their word that they’re willing to do the chore for the reduced price, at the cost of determinism, which allows better planning.
Plus, I think it doesn’t work when there are only two players? If I honestly bid $30, and you bid $40 and randomly get awarded the auction, then I have to pay you $40. And that leaves me at -$10 disutility, since the task was only -$30 to me.
To be sure I’m following you: If the 2nd bidder gets it (for the same price as the first bidder), the market efficiency is lost because the 2nd person is indifferent between winning and not, while the first would have liked to win it? If so, I think that’s right.
If there are two players… I agree the first bidder is worse off than they would be if they had won. This seems like a special case of the above though: why is it more broken with 2 players?
Yes, that’s one of the inefficiencies. The other inefficiency is that whenever the 2nd player wins, the service gets more expensive.
If there are two players… I agree the first bidder is worse off than they would be if they had won. This seems like a special case of the above though: why is it more broken with 2 players?
Because of the fact that the service gets more expensive. When there are multiple players, this might not seem like such a big deal—sure, you might pay more than the cheapest possible price, but you are still ultimately all benefiting (even if you aren’t maximally benefiting). Small market inefficiencies are tolerable.
It’s not so bad with 3 players who bid 20, 30, 40, since even if the 30-bidder wins, the other two players only have to pay 15 each. It’s still inefficient, but it’s not worse than no trade.
However, when your economy consists of two people, market inefficiency is felt more keenly. Consider the example I gave earlier once more:
I bid 30. You bid 40. So I can sell you my service for $30-$40, and we both benefit.
.
But wait! The coin flip makes you win the auction. So now I have to pay you $40.
My stated preference is that I would not be willing to pay more than $30 for this service. But I am forced to do so. The market inefficiency has not merely resulted in a sub-optimal outcome—it’s actually worse than if I had not traded at all!
Edit: What’s worse is that you can name any price. So suppose it’s just us two, I bid $10 and you bid $100, and it goes to the second bidder...
I don’t think that the service gets more expensive under a second price auction (which Choron uses). If you bid $10 and I bid $100, normally it would go to you for $100. In the randomized case, it might go to me for $100.
I think I agree with you about the possibility of harm in the 2 person case.
I don’t think that the service gets more expensive under a second price auction (which Choron uses). If you bid $10 and I bid $100, normally it would go to you for $100. In the randomized case, it might go to me for $100.
Oh yes, that’s right. I think I initially misunderstood the rules of the second price—I thought it would be $10 to me or $100 to you , randomly chosen.
What kind of gaming the system were you thinking of?
Yeah, bidding = deception. But in addition to someonewrong’s answer, I was thinking you could just end up doing a shitty job at things (e.g. cleaning the bathroom). Which is to say, if this were an actual labor market, and not a method of communicating between people who like each other and have outside-the-market reasons to cooperate, the market doesn’t have much competition.
Yeah, that’s unfortunately not something we can really handle other than decreeing “Doing this chore entails doing X and it doesn’t count if you don’t do X.” Enforcing the system isn’t solved by the system itself.
a method of communicating between people who like each other and have outside-the-market reasons to cooperate
Except she specifies that if they’re bidding above market wages for a task (cleaning the bathroom would work fine), they’ll just pay someone else to do it. Of course, chores like getting up to deal with a sick child are not so outsourceable.
Wasn’t it Ariely’s Predictably Irrational that went over market norms vs. tribe norms? If you just had ordinary people start doing this, I would guess it would crash and burn for the obvious market-norm reasons (the urge to game the system, basically). And some ew-squick power disparity stuff if this is ever enforced by a third party or even social pressure.
Empirically speaking, this system has worked in our house (of 7 people, for about 6 months so far). What kind of gaming the system were you thinking of?
We do use social pressure: there is social pressure to do your contracted chores, and keep your chore point balance positive. This hasn’t really created power disparities per se.
If the idea is to say exactly how much you are willing to pay, there would be an incentive to:
1) Broadcast that you find all labor extra unpleasant and all goods extra valuable, to encourage people to bid high
2) Bid artificially lower values when you know someone enjoys a labor / doesn’t mind parting with a good and will bid accordingly.
In short, optimal play would involve deception, and it happens to be a deception of the sort that might not be difficult to commit subconsciously. You might deceive yourself into thinking you find a chore unpleasant—I have read experimental evidence to support the notion that intrinsically rewarding tasks lose some of their appeal when paired with extrinsic rewards.
No comment on whether the traditional way is any better or worse—I think these two testimonials are sufficient evidence for this to be worth people who have a willing human tribe handy to try it, despite the theoretical issues. After all,
Edit: There is another, more pleasant problem: If you and I are engaged in trade, and I actually care about your utility function, that’s going to effect the price. The whole point of this system is to communicate utility evenly after subtracting for the fact that you care about each other (otherwise why bother with a system?)
Concrete example: We are trying to transfer ownership of a computer monitor, and I’m willing to give it to you for free because I care about you. But if I were to take that into account, then we are essentially back to the traditional method. I’d have to attempt to conjure up the value at which i’d sell the monitor to someone I was neutral towards.
Of course, you could just use this as an argument stopper—whenever there is real disagreement, you use money to effect an easy compromise. But then there is monetary pressure to be argumentative and difficult, and social pressure not to be—it would be socially awkward and monetarily advantageous if you were constantly the one who had a problem with unmet needs.
But if other people bid high, then you have to pay more. And they will know if you bid lower, because the auctions are public. How does this help you?
I don’t understand how this helps you either; if you bid lower and therefore win the auction, then you have to do the chore for less than you value it at. That’s no fun.
The way our system works, it actually gives the lowest bidder, not their actual bid, but the second lowest bid minus 1; that way you don’t have to do bidding wars, and can more or less just bid what you value it at. It does create the issue that you mention—bid sniping, if you know what the lowest bidder will bid you can bid just above it so they get as little as possible—but this is at the risk of having to actually do the chore for that little, because bids are binding.
I’d very much like to understand the issues you bring up, because if they are real problems, we might be able to take some stabs at solving them.
This has become somewhat of a norm in our house. We can pass around chore points in exchange for rides to places and so forth; it’s useful, because you can ask for favors without using up your social capital. (Just your chore points capital, which is easier to gain more of and more transparent.)
You only do this when you plan to be the buyer. The idea is to win the auction and become the buyer, but putting up as little money as possible. If you know that the other guy will do it for $5, you bid $6, even if you actually value it at $10. As you said, I’m talking about bid sniping.
Ah, I should have written “broadcast that you find all labor extra unpleasant and all goods extra valuable when you are the seller (giving up a good or doing a labour) so that people pay you more to do it.”
If you’re willing to do a chore for _$10, but you broadcast that you find it more than -$10 of unpleasantness, the other party will be influenced to bid higher—say, $40. Then, you can bid $30, and get paid more. It’s just price inflation—in a traditional transaction, a seller wants the buyer to pay as much as they are willing to pay. To do this, the seller must artificially inflate the buyer’s perception of how much the item is worth to the seller. The same holds true here.
When you intend to be the buyer you do the opposite—broadcast that you’re willing to do the labor for cheap to lower prices, then bid snipe. As in a traditional transaction, the buyer wants the seller to believe that the item is not of much worth to the buyer. The buyer also has to try to guess the minimum amount that the seller will part with the item.
So what I wrote above was assuming the price was a midpoint between the buyer’s and seller’s bid, which gives them both equal power to set the price. This rule slightly alters things, by putting all the price setting power in the buyer’s hands.
Under this rule, after all the deceptive price inflation is said and done you should still bid an honest $10 if you are only playing once—though since this is an iterated case, you probably want to bid higher just to keep up appearances if you are trying to be deceptive.
One of the nice things about this rule is that there is no incentive to be deceptive unless other people are bid sniping. The weakness of this rule is that it creates a stronger incentive to bid snipe.
Price inflation (seller’s strategy) and bid sniping (buyer’s strategy) are the two basic forms of deception in this game. Your rule empowers the buyer to set the price, thereby making price inflation harder at the cost of making bid sniping easier. I don’t think there is a way around this—it seems to be a general property of trading. Finding a way around it would probably solve some larger scale economic problems.
(I’m one of the other users/devs of Choron)
There are two ways I know of that the market can try to defeat bid sniping, and one way a bidder can (that I know of).
Our system does not display the lowest bid, only the second lowest bid. For a one-shot auction where you had poor information about the others preferences, this would solve bid sniping. However, in our case, chores come up multiple times, and I’m pretty sure that it’s public knowledge how much I bid on shopping, for example.
If you’re in a situation where the lowest bid is hidden, but your bidding is predictable, you can sometimes bid higher than you normally would. This punishes people who bid less than they’re willing to actually do the chore for, but imposes costs on you and the market as a whole as well, in the form of higher prices for the chore.
A third option, which we do not implement (credit to Richard for this idea), is to randomly award the auction to one of the two (or n) lowest bidders, with probability inversely related to their bid. In particular, if you pick between the lowest 2 bidders, both have claimed to be willing to do the job for the 2nd bidder’s price (so the price isn’t higher and noone can claim they were forced to do something for less than they wanted). This punishes bid-snipers by taking them at their word that they’re willing to do the chore for the reduced price, at the cost of determinism, which allows better planning.
And market efficiency.
Plus, I think it doesn’t work when there are only two players? If I honestly bid $30, and you bid $40 and randomly get awarded the auction, then I have to pay you $40. And that leaves me at -$10 disutility, since the task was only -$30 to me.
To be sure I’m following you: If the 2nd bidder gets it (for the same price as the first bidder), the market efficiency is lost because the 2nd person is indifferent between winning and not, while the first would have liked to win it? If so, I think that’s right.
If there are two players… I agree the first bidder is worse off than they would be if they had won. This seems like a special case of the above though: why is it more broken with 2 players?
Yes, that’s one of the inefficiencies. The other inefficiency is that whenever the 2nd player wins, the service gets more expensive.
Because of the fact that the service gets more expensive. When there are multiple players, this might not seem like such a big deal—sure, you might pay more than the cheapest possible price, but you are still ultimately all benefiting (even if you aren’t maximally benefiting). Small market inefficiencies are tolerable.
It’s not so bad with 3 players who bid 20, 30, 40, since even if the 30-bidder wins, the other two players only have to pay 15 each. It’s still inefficient, but it’s not worse than no trade.
However, when your economy consists of two people, market inefficiency is felt more keenly. Consider the example I gave earlier once more:
I bid 30. You bid 40. So I can sell you my service for $30-$40, and we both benefit. . But wait! The coin flip makes you win the auction. So now I have to pay you $40.
My stated preference is that I would not be willing to pay more than $30 for this service. But I am forced to do so. The market inefficiency has not merely resulted in a sub-optimal outcome—it’s actually worse than if I had not traded at all!
Edit: What’s worse is that you can name any price. So suppose it’s just us two, I bid $10 and you bid $100, and it goes to the second bidder...
I don’t think that the service gets more expensive under a second price auction (which Choron uses). If you bid $10 and I bid $100, normally it would go to you for $100. In the randomized case, it might go to me for $100.
I think I agree with you about the possibility of harm in the 2 person case.
Oh yes, that’s right. I think I initially misunderstood the rules of the second price—I thought it would be $10 to me or $100 to you , randomly chosen.
Yeah, bidding = deception. But in addition to someonewrong’s answer, I was thinking you could just end up doing a shitty job at things (e.g. cleaning the bathroom). Which is to say, if this were an actual labor market, and not a method of communicating between people who like each other and have outside-the-market reasons to cooperate, the market doesn’t have much competition.
Yeah, that’s unfortunately not something we can really handle other than decreeing “Doing this chore entails doing X and it doesn’t count if you don’t do X.” Enforcing the system isn’t solved by the system itself.
Good way to describe it.
Except she specifies that if they’re bidding above market wages for a task (cleaning the bathroom would work fine), they’ll just pay someone else to do it. Of course, chores like getting up to deal with a sick child are not so outsourceable.